Michael Gove: I am very grateful to the Secretary of State for correcting his Department's mistake. I am also grateful to him for writing to me; I have not yet received that letter and I would be grateful for any clarification that he can give at the Dispatch Box.
	The Sutton Trust has expressed its deep concern about the continuing under-achievement of children eligible for free school meals. It says that far from acting as a great leveller, the current education system is perpetuating inequalities. Nearly 40 per cent. of pupils eligible for free school meals do not even get a single grade C at GCSE. The 16-year-olds who left school this year had their entire education under Labour. Sir Terry Leahy has expressed his concern that standards are still woefully low and Sir Stuart Rose has said that that school leavers cannot do reading, cannot do arithmetic and cannot do writing. Are Sir Terry and Sir Stuart wrong?

Dawn Primarolo: As the hon. Gentleman knows, schools are not marked down solely on account of minor administrative issues; Ofsted has assured us that that is the case. The hon. Gentleman raises the point of a failure being identified during an inspection that is corrected subsequently. If it is corrected before the inspection is completed, that can be added to the assessment, but as he knows, the inspection is a snapshot and there is a gap between its taking place and the publication of the findings, so in some circumstances even though schools may have corrected matters, that snapshot cannot be changed. If the hon. Gentleman is worried about a particular issue, I will be more than happy either to speak to him about it, or to receive details in writing and look into it further.

Gordon Prentice: How many Muslim girls' boarding schools there are with more than 4,000 pupils in England.

Diana Johnson: To date, there are no Muslim girls' boarding schools with more than 4,000 pupils established in England.

Vernon Coaker: I know that the hon. Gentleman spends considerable time raising these issues on a number of occasions, not only because of the passion that he feels about the subject, but because of his constituency interest. Given what is happening at the moment, it is obviously important that we reflect on what is taught in our schools to ensure that our young people grow up with the values that we want for them. He will know, because he will have looked into this, that, as the Under-Secretary of State for Children, Schools and Families, my hon. Friend the Member for Kingston upon Hull, North (Ms Johnson), has just said, British history is a part, and will form a part, of the primary school curriculum. If he were to read the content for the key stage 3 curriculum, he would see that many of the things that he has just mentioned are part of it-I am sure that he would welcome that.

Vernon Coaker: First, I congratulate my hon. Friends the Members for Plymouth, Sutton (Linda Gilroy) and for Plymouth, Devonport (Alison Seabeck) on the work they did to campaign for Plymouth to be part of the Building Schools for the Future programme. Schools buildings are important, but to get BSF money authorities also have to demonstrate that the new buildings are linked to school improvement and a strategy for change; clearly, standards are an essential part of any school building programme. When I went to Plymouth, I saw that one of the reasons why Plymouth has been successful with its bid is that it has clearly identified that the new school buildings will be a means by which it can continue to improve on the already excellent standards in its area.

Gordon Brown: With permission, let me begin this statement on Afghanistan by once more paying tribute to our armed forces. Since 2001, our forces have been fighting in Afghanistan one of the longest military campaigns of recent times-longer, indeed, than the world wars of the last century-as part of our century's fight against global terrorism.
	At all times our armed forces have shown the highest professionalism, dedication and courage, which make them the best and most admired in the world. They have endured heavy and tragic casualties. They deserve our utmost gratitude. Let me acknowledge the presence today, as visitors to the House, of members of 19 Light Brigade who have served with distinction in Afghanistan.
	Decisions to extend military action are as critical as those that commence military action. There are two prior questions that people ask of our mission with our American and coalition allies in Afghanistan: one about the present, one about the future. Rightly, both questions have to be answered. The first is why today our armed forces are in Afghanistan, and the second is how and when Afghanistan can take responsibility for its own security so that our troops can come home.
	The origins of our intervention in Afghanistan and the scale of the terrorist threat are known to us all. Around the world thousands of men and women of all religions, including thousands of the Muslim faith, have been murdered in al-Qaeda outrages. The London 7 July bombings cost 52 lives and injured more than 750 people. More recently in Britain, we have seen the 2006 Heathrow liquid bombs plot, the 2007 London and Glasgow bombings, and then this year an al-Qaeda-inspired conspiracy to target shopping centres. There are now over 120 convicted terrorists serving sentences in British prisons, and the security services report to me weekly on the hundreds of would-be terrorists who seek to operate within and target our country.
	To counter that terrorist threat, we have, since 2001, trebled the resources available to our intelligence services and more than doubled the number of operatives. Today, almost twice as many regular police officers are engaged in full-time work to counter the terrorist threat. Suspect travellers are now checked at the border in real time against watch lists; an increasing number of people are excluded on national security grounds from Britain; and, because this is a fight for hearts and minds against violent extremism and those ideologies that would pervert the true Islamic faith, we have stepped up our work with our allies both to expose the damage that murderous and extremist ideologies do and to support those working across all faiths to uphold the common ground of dignity tolerance and respect for all.
	So, our security in the United Kingdom and our effort to counteract terrorist propaganda have been, and continue to be, strengthened at all levels. Faced with the terrorist threat, some have argued that the most effective strategy is simply to defend Britain within our own borders-a fortress Britain; and some ask why British troops are in Afghanistan at all, if al-Qaeda can organise in Britain, in Somalia, in Yemen, in other places and, even, in internet chat rooms in every part of the world. But, as long as the Afghan-Pakistani border areas are the location of choice for al-Qaeda and the epicentre of global terrorism, it is the Government's judgment that we must address the terrorist threat at its source. Indeed, as long as three quarters of the most serious terrorist plots against Britain have links to those Pakistani-Afghan border areas, we would be failing in our duty if we did not work with our allies to deal with the problem where it starts. A more stable and secure Afghanistan and Pakistan will help to ensure a safer Britain.
	Since 2001, progress has been made in driving al-Qaeda into the mountains of Waziristan. Today, for the first time since 2001, tens of thousands of Pakistani troops are in Waziristan, and, with President Obama, I have been urging Pakistan's leadership, most recently in a conversation with President Zardari on Saturday, to step up its efforts not just against the Pakistani Taliban in that region but against al-Qaeda. So, as an international community, we must intensify our support for the action of the Pakistani authorities, improve co-operation with Pakistan in the months ahead and press ahead with a development programme, amounting to two thirds of a billion pounds over four years, which is focused increasingly on the border areas and on encouraging the development of schools to counter the propaganda of the madrassahs. It is essential that progress in driving al-Qaeda from Afghanistan be matched by actions not simply to isolate but to defeat al-Qaeda within Pakistan.
	Success in driving al-Qaeda into Waziristan has led some to propose that it is now sufficient simply to target al-Qaeda there. To explain why that is an inadequate response, we must understand the al-Qaeda network, its long-standing links with the Afghan Taliban and the extent to which al-Qaeda continues to seek, as in the past, a Taliban-controlled, permissive Afghanistan that would allow it unfettered opportunities to plan and launch with impunity its attacks on Britain and other countries.
	So, our task is to prevent the Taliban from giving al-Qaeda that safe haven. Stabilising Afghanistan will not solve all our challenges in Pakistan and elsewhere, but instability in Afghanistan can only increase the risk of conflagration where the rest of the world can least afford it. That is why the safety of people on the streets of Britain requires us to deny al-Qaeda the space to operate across Pakistan and the option of returning to operate in Afghanistan.
	That is the considered view of the 43-nation coalition, a unique force of NATO and non-NATO members led by the United States of America and supported by clear United Nations resolutions. Today our purpose is the same as in 2001: to deny al-Qaeda space to operate. But our approach to achieving that has now to be different. In December 2007, our Government became one of the first to suggest that Afghanistan must be prepared to take far greater control of its own security. Since then, we have consistently argued that to weaken the Taliban we have to strengthen the Afghan Government nationally and locally.
	This approach is built on our knowledge that the Taliban have only minority support among the Afghan people and our judgment that the long-term security of Afghanistan is best secured by training the Afghan army and police, by building up civilian government at a local as well as national level, and through economic development giving Afghans a stake in their future. This has to be supported, as we propose, by stronger international civilian leadership to work alongside General McChrystal to deliver the civilian aspects of this strategy. It is an outline programme for the transfer of lead security responsibilities to the Afghans-district by district, province by province-with the first districts and provinces potentially being handed over during next year. Let us be clear that this process will depend on the Afghans being ready to take responsibility and control: first, through more trained Afghan troops; secondly, through better policing; thirdly, through effective local and national Government; and fourthly, by giving Afghans, as I said, a stronger stake in their economic future.
	I can also say that over time our objective is to work for and to encourage a new set of relationships between Afghanistan and its neighbours based on their guarantee of non-interference in Afghanistan's future affairs and on a commitment to fostering not only its long-term economic and cultural links with other powers in the region but immediate confidence-building security measures from which all can benefit. So I want the London conference on Afghanistan to be held on 28 January, which President Karzai and the Secretary-General of the United Nations have confirmed they will attend, to unite the international community behind a programme now and for the longer term to help the Afghans to secure and govern their own country.
	Against this background, our coalition military strategy is essentially to create the space for an effective political strategy to work, weakening the Taliban by strengthening Afghanistan itself: a military surge, yes, but complemented by a political surge that is, most of all, an Afghan surge. Today I want to set out the benchmarks for this approach and then, and in that context, to give details of the numbers and deployments of our armed forces.
	First, over the coming year, the coalition seeks a major expansion of the Afghan army from 90,000 to 134,000. We expect this surge in recruitment to allow an extra 10,000 troops to be deployed in Helmand, of which 5,000 will be trained and partnered by British forces. And we can start now. Six hundred Afghan soldiers are arriving in Helmand this month-an extra company for each Afghan battalion there. A further 10 Afghan companies-1,000 more troops-will soon reinforce the Afghan army's 205 Corps across southern Afghanistan. Increasingly, therefore, it will be Afghan forces that clear and hold ground as they prepare for the time when they can assume responsibility for their own security.
	Secondly, within the next six months, the international community will agree with President Karzai's Government a police reform plan. We have agreed that, in Helmand, Afghan police numbers will increase immediately to 4,100, with further increases to follow. By mid-2010, the capacity of the Helmand police training centre that we have established in Lashkar Gar will be doubled, and we will double the numbers of police trainers provided by the Royal Military Police from 100 this year to 200 next year.
	Thirdly, there needs to be an effective and accountable local administration. Over the next nine months, President Karzai will be expected to implement, with our support and that of our international partners, far-reaching reforms to ensure that from now on all 400 provinces and districts have a governor appointed on merit, free from corruption with clearly defined roles, skills and resources. District community shuras have been formed in Nad Ali, in Garmsir, in Gereshk and in Nawa, with more to come. Nationwide, the number of community development councils will increase within two years from 22,000 to 31,000.
	Fourthly, there should be a clean, effective and inclusive national Government in Kabul-one that reaches out to political leaders and citizens from all strands of Afghan society. While President Karzai has agreed with us on the priority of tackling corruption with a new anti-corruption taskforce-and last week the arrest of 12 leading officials took place-we recognise that the test is not initiatives but delivery on the ground, and we will monitor carefully what President Karzai's Administration are doing.
	We support President Karzai's call for a Loya Jirga and for reconciliation. It is the task of military forces-international and Afghan-to weaken and pressurise the insurgency, but it is right and essential that this work is combined with the offer of a way forward for those prepared to renounce violence and to choose to join the political process. Reintegration can only be led, and must be led, by Afghans themselves at both national and local levels.
	For Afghanistan to enjoy stability in the future, farmers and working people in towns and villages must have a greater stake in that economic future: a major Afghan-led programme backed by significant funding to identify the likely growth areas in the Afghan economy, and to provide Afghans with credible economic alternatives to the poppy and the insurgency. With 20 per cent. more land growing wheat, this year's wheat harvest is expected to be the highest in 30 years. Programmes funded by our development Department will this year create 20,000 jobs in this area, and by 2013 will be able to raise the incomes of 200,000 people.
	I turn now to the details of our force levels and our deployments. In my statement to the House on 14 October, I said that to support our strategy of Afghanisation-and particularly to train more Afghan soldiers and police, while at the same time maintaining the security of our forces-the Government had agreed in principle a new force level of 9,500, to be implemented once three conditions were met. I can report on each of these conditions.
	First, I made it clear that we would increase the number of British personnel in Afghanistan only if we were assured that it would continue to be the case that every soldier and unit deployed is fully equipped for the operations they are asked to undertake. At this morning's meeting of our Afghanistan and Pakistan national security committee, the Chief of the Defence Staff gave that assurance-that this condition has been met both for the existing force and the additional 500 troops. Indeed, the chiefs report to me the continuing delivery of new equipment. Newly arrived Merlin helicopters have today been given the "green light" for operations in Afghanistan, a month ahead of schedule. Compared with three years ago, we have doubled helicopter flying hours; in the coming months, these will increase by a further 20 per cent.
	By the end of the year, the number of heavily armoured, mine-resistant Mastiff vehicles will have almost doubled compared with August. The number of Ridgback-a smaller, more agile version of the Mastiff-will have increased by over 75 per cent. By spring next year, they will be joined by more Mastiffs adapted for explosive disposal work and new Warthog tracked vehicles, showing the results of our investment over the last three years of more than £1 billion from the Treasury reserve in vehicles for Afghanistan. By the end of this year also, the build-up of a 200-strong counter-improvised explosive device task force, along with the dedicated equipment necessary, will be complete. In addition, aerial surveillance hours available to commanders have increased by over 40 per cent., and a further 200 specialist troops will be deployed against IEDs by spring 2010.
	Three years ago, equipment and support for our forces deployed to Afghanistan, funded from the Treasury reserve, was estimated at around £190,000 supporting each individual there. This year it is more than double that-around £400,000 and still rising-and the best possible support and equipment is what we owe those who are fighting for our country in Afghanistan.
	I said, secondly, that our contribution of 9,500 must be part of an agreed approach across the international coalition, with all countries bearing their share-a coalition whose principal member and largest troop contributor is of course the United States of America, and we continue regular discussions with the President and his team about the coalition's evolving strategy. America, as everyone knows, will make an announcement tomorrow, and the Secretary-General of NATO-I pay tribute to his work-reports that, in addition to the UK and the USA, eight countries have already made offers of additional troops and that other countries are likely to follow.
	It is often said that America and Britain are fighting alone. This is wrong: excluding America and Britain, the numbers of international coalition troops will have risen from 16,000 troops in January 2007 to around 30,000 soon, and I believe that over the coming months even more countries will respond. Our effort in Helmand will benefit. Last year, total international force levels in the province were around 7,000; now they will be above 20,000-three times what they were.
	Our third condition for deploying additional British troops was that the military effort of the international coalition must be matched by Afghan effort. President Karzai and his Defence Minister have assured us not only that 5,000 members of the new Afghan national army corps will be deployed to Helmand to be partnered by British troops during 2010, but that additional recruits will arrive for training in the next few weeks.
	So with the three conditions now met, I can confirm that we will move to a new force level of 9,500; that the extra troops will deploy in early December to thicken the UK troop presence in central Helmand; and that from late January they will make the transition to the partnering role that we envisage for them. For understandable reasons of operational security, we shall continue to withhold information about their deployment and the nature of activities of our special forces, but at this time of increasing international effort, it is right to give a more comprehensive account of our total military commitment to the Afghanistan campaign. I believe that the British people have a right to know, and deserve the assurance, that our highly professional, widely respected and extraordinarily brave special forces are playing their full role not only in force protection but in taking the fight directly to the Taliban, working in theatre alongside our regular forces. I want the whole country to pay tribute to their work.
	Taking into account those special forces, their supporting troops and the increases announced today, our total military effort in Afghanistan will be in excess of 10,000 troops. That force level enables us to deliver our military strategy of bringing security to the population. It will support our political strategy of strengthening the Afghan Government at national and local level, as they in return take steps to govern in a clearer, more effective and more inclusive way. It will accelerate the development of the Afghan army and police, so that in time they can take over responsibility for security and thus ensure that our troops can come home.
	We are ensuring as best we can the safety of our forces, and we are today setting benchmarks for Afghanistan to meet. In the past few months, we have worked hard to achieve a stronger military presence across the coalition, with a more equal sharing of the burden, and in all we do we will never forget this fundamental truth of the military campaign: that keeping the streets of our country free from terrorism is our utmost responsibility, and that for a safe Britain, we need a stable Afghanistan. I commend this statement to the House.

David Cameron: I thank the Prime Minister for his statement, but before turning to Afghanistan, may I start by putting right something I got wrong last week? Although the two Islamic schools I mentioned got Government money while being run by people linked to the extremist group Hizb ut-Tahrir, and although they did receive that money under a pathfinder scheme, it was not the pathfinder scheme concerned with combating extremism. I am sorry for the error-I believe that when one gets a fact wrong, one should put it right-but I continue to believe that it is wrong that taxpayers' money goes to schools run by extremists.
	In Afghanistan, 235 British service personnel and Ministry of Defence staff have lost their lives and many more have been injured. That is a high price to pay, so first I endorse absolutely what the Prime Minister said about our forces. They are doing an extraordinary job, and they have the admiration and support of our whole country. We also back the reason for being in Afghanistan-that is, to enable Afghans to look after their own security without presenting a danger to the rest of the world. The sooner that happens, the sooner our forces can come home.
	I want to ask the Prime Minister today about three matters: first, the political and military surge; secondly, the conference that is planned for January; and thirdly, the timetable that he has set out for handing over provinces and districts to Afghan control. On the 500 additional British troops, this is the same further deployment that the Prime Minister announced on 14 October, as he said, subject to the three conditions being met. Let me ask a little more about the three conditions. The first was burden sharing among NATO allies. He told the House on 18 November that he was in touch with eight allies about increasing their contribution, and he repeated the figure of eight allies today. Can he tell us which countries have pledged more troops, how many troops there will be in total, when they will be deployed and how many of them will go to Helmand?
	The second condition was to ensure the forces had the necessary equipment. The Prime Minister today tells us that they will have that equipment. I have to say that that is a test set by the Government and then judged by the Government. Although what he said about helicopters is welcome, is it not the case that in pro rata support, the US forces in Helmand have far more helicopters available to them? Is it not also the case that the Merlins, which the Prime Minister mentioned, are unconnected to the 500 troops that we will deploy because the Merlins were ordered a long time previously? It is worth making the point that if the Prime Minister had not personally cut £1.4 billion off the helicopter programme, we would not be in the situation that we are in today.
	The third condition was that additional Afghan forces would deploy to Helmand. The Prime Minister helpfully gave us the figures today. Will he assure us that they will remain in Helmand once deployed? Is it still the case, as was reported to me, that fewer than 10 per cent. of Afghan forces are in Helmand province, even though almost half the fighting in Afghanistan takes place there?
	The Prime Minister has set out some clear benchmarks for the Karzai Government. Why are we setting out such conditions only now, three and a half years after our forces arrived in Helmand? On the detail, is it really credible to deal with corruption in the police in the Prime Minister's six-month timetable when we have not managed it in the past three and a half years?
	On what the Prime Minister said about appointing provincial governors, since my understanding is that most are already in place, what exactly does he mean by that pledge? Does he mean that some current governors must be replaced?
	Let us consider the London conference. The Prime Minister also mentioned the Loya Jirga. Does he now believe that the Bonn settlement got it wrong and that the constitution in Afghanistan is too centralised? We have been pressing for some time for the appointment of a senior international figure to help drive forward the political strategy. Does the Prime Minister believe that that will now happen? Will he take up our suggestion of creating a permanent contact group of Afghanistan's neighbours to help deliver stability?
	On Pakistan, some of Prime Minister's remarks at the weekend, reported in the press, seem rather different from what he has said in the Chamber in recent weeks. When I asked him in October about Pakistan, he went out of his way to defend the way in which Pakistan was planning to take on al-Qaeda. As he put it, the Pakistan Government were
	"planning how to deal with not only the Pakistan Taliban but the Afghan Taliban and al-Qaeda itself."-[ Official Report, 14 October 2009; Vol. 497, c. 305.]
	He described that as "encouraging". However, he has now gone out of his way to criticise Pakistan for failing to deal with al-Qaeda. Will he tell us a little more about what has changed in his thinking about the approach?
	There has also been much speculation, following what the Prime Minister said in Trinidad, about timetables for handover. The statement to the House is slightly different from the briefing given to the press at the weekend. He says that he wants the London conference to determine the conditions for transferring provinces and districts to Afghan control. Yet he also said, not to the House, but in Trinidad, that he wants to see at least five provinces transferred to Afghan "security lead" by the end of 2010, and that he believed that that would be possible for "one or two" districts in Helmand. How can the Prime Minister be confident of that timetable before the London conference has even met and set the benchmarks? Naturally we all want our troops to come home as soon as possible-as soon as their job is done. However, does the Prime Minister agree that we must never say or do anything that gives the impression to the Taliban that we will not see this through? Nor should we raise any false hope or expectation among the families of British forces that may later be dashed. Can he therefore assure the country and our forces, as we approach the general election, that any suggestion about timetables for handover will be based on a hard-headed assessment of the situation on the ground? Is not it the case that the British public want us to do what is right-not speculate and risk the danger of raising false hopes?

Nicholas Clegg: I welcome the Prime Minister's statement, and of course join him in recognising and commending the enormously impressive work and selfless bravery of our armed forces in Afghanistan. I also join him in welcoming the soldiers from 19 Light Brigade and others who are in the House of Commons today.
	It has finally become mainstream to talk about the need for a big shift in our strategy in Afghanistan. When I first questioned the effectiveness of our action there six months ago and called for precisely such a step change, I was told that it was unpatriotic to do so. The Prime Minister's change of tone since then has been dramatic and welcome. Our approach to our mission in Afghanistan has always been simple: we should do it properly or not do it at all. So does the Prime Minister agree that success is not just about troop numbers, and that focusing on troop numbers, as he has done today, to the exclusion of other things is putting the cart before the horse?
	There is no point in sending a single extra soldier unless the strategy that our troops need to succeed in their mission is in place. So why is the Prime Minister making any announcements about troop numbers today, when we will not know until President Obama's announcement tomorrow what the new strategy is and what chances it has of success? I have in the past criticised the Prime Minister for keeping quiet over Afghanistan and failing to speak out in support of our troops and their mission. Has he not now swung a little too far in the opposite direction, seeking to make an announcement on troop numbers before we know whether the things are in place that would allow them to succeed?
	We know from previous successful peacekeeping missions, such as those in the Balkans, that we cannot succeed unless we have the support of all the big regional powers. In Afghanistan that does not mean just Pakistan, China and Russia; it also means Iran, which is now at loggerheads with the west over its unacceptable announcement of 10 new nuclear facilities. Can the Prime Minister tell us how he will find a way to take a tough stance with Iran while seeking to keep it engaged in securing peace in Afghanistan?
	A centrepiece of the Prime Minister's announcement today was his benchmark-setting for President Karzai. What happens if President Karzai does not achieve those benchmarks? What efforts are the Prime Minister and others in the alliance making to develop a plan B of bypassing Karzai's Government in Kabul and instead dealing directly with local and regional government? I am sure that the Prime Minister agrees with me that, given Karzai's record on corruption, we should not hold our breath for him to change, but work on finding ways to succeed without him if he does not.
	Let me turn to what the Prime Minister said about improved equipment for our brave troops, in particular the welcome delivery of new Mastiff, Ridgback and Warthog vehicles. Can he confirm here today that that means that the poorly protected Snatch Land Rovers are no longer being used by any of our troops out in deployment in Afghanistan?
	Finally, let me address the issue of troop deployments by our NATO allies. The Prime Minister himself said that the deployment of any extra British troops would be conditional on other countries sharing the burdens, yet he refuses to tell us today exactly which other countries are sharing that burden. As he has made that a condition, will he now be clear and detailed in setting out what he expects? Which NATO countries are offering troops, when will they arrive in Afghanistan and what will their role be on the ground?
	For several years now, since our troops first stepped into Afghanistan, the Government's strategy has been over-ambitious in aim and under-resourced in practice. I hope that today's announcement and the one that will follow tomorrow from President Obama finally turn the situation around, so that our troops have what they need for success and can come home as soon as possible, with their heads held high.

Ann Winterton: Having campaigned over the last four years for more protected vehicles with v-shaped hulls, I welcome the increased numbers of Mastiffs and Ridgbacks being delivered to theatre. Is the Prime Minister confident that the extra troops being sent to Afghanistan will not have the opposite effect to that which is intended-to exacerbate the situation, as has happened in the past? Could this not be history repeating itself?

Andy Burnham: I will deal with the hon. Gentleman's questions in turn, but let me deal first with his last point. I think he was accusing us of complacency, or of failing to address directly the issues that matter to patients. Ever since coming into this job, I have said that I do not want to over-claim for the NHS. Where it is good we should say so, but where there needs to be improvement, we will not flinch from taking the action necessary to get it.
	It is important for the hon. Gentleman to acknowledge that the data on which the judgments in question are being made have been encouraged by this Government, following some of the events that he mentioned. The culture of challenge and analysis of clinical data has been at the heart of our plans for improving the NHS, which is why what he said was unfair and misdirected. It was this Government who asked the regulators to use the HSMR data to ensure that there was challenge. Because the Healthcare Commission, the predecessor to the CQC, was looking at those data, it was able to take the action that it did in relation to Mid Staffordshire.
	I will always accept hearing from the hon. Gentleman that we can do more and should not be complacent, but I point out to him that there is no complacency. We have made changes, and thinking back to what was in place before, I do not believe that it was possible to make judgments about the clinical standard and safety of care across the NHS, as it is today.
	I shall deal with some of the hon. Gentleman's specific points. He particularly asked me about 4 November, when the report was submitted by the CQC. He has to accept that, as I said in my statement, the matter goes back further than that. Because of the system of regulation that we have, and because there is routine monitoring of data, action had been taken much earlier and the two regulators had been in contact about Basildon and Thurrock NHS foundation trust. Action was in hand and a plan had been developed, and it was because the regulators felt that progress against that plan had not been sufficiently swift that they decided to escalate their involvement. It is not fair of the hon. Gentleman to say that there was a knee-jerk response, because there had been a long process in place that had failed to produce the necessary improvements, and an unannounced visit by the CQC in October highlighted some of the concerns that then required the escalation.
	On Colchester, the hon. Gentleman will know that Monitor has been expressing concerns about standards for some time and has been in dialogue with the trust. I support the regulator, in this case Monitor, in taking the action that it believes is necessary to improve standards for patients quickly. I shall make no apology for that.
	The hon. Gentleman mentioned the relationship between the CQC and Monitor, and I agree that there needs to be close co-operation between the two regulators. I accept that there were lessons to be learned following the events at Mid Staffordshire about how that relationship could be improved, and I accept that he is right to say so, but there has been close co-operation on Basildon and Thurrock, and that has led to the action that I have described.
	On Dr. Foster, the hon. Gentleman asked, "Why shoot the messenger?", but I do not believe that the Government did that. As I said, we have encouraged the publication of the relevant data across the NHS. He needs to take a step back, if he does not mind my saying so, because the patient safety rating in this case is disputed by some of the trusts in question. He will have seen yesterday that some of them issued a pretty strong rebuttal to the concerns raised, and that is all part of the process of challenge. We did not dismiss the Dr. Foster findings; indeed, it was on the back of those concerns that I asked to be assured that no action similar to that taken at Basildon and Colchester needed to be taken against any other NHS trust. I received that assurance from the chair of the CQC over the weekend.
	As he always does, the hon. Gentleman made a big criticism of Government targets and suggested that they run counter to improving patient safety in the NHS. The best hospitals are both meeting performance standards targets that matter to patients and financial targets, and providing high-quality, safe care.
	Is the hon. Gentleman really saying that A and E departments were safer before the introduction of the four-hour target? I am not sure that he wants to make that claim. I remind him-it almost seems to have slipped his memory and that of his colleagues-that the patients charter circa 1995 included a four-hour A and E standard, and a proposal to reduce that target to two hours once it had been embedded. I do not therefore believe that it is possible for Conservative Members to stand at the Dispatch Box and claim that setting such targets is the wrong thing to do.
	The hon. Gentleman mentioned the need for patient feedback and I agree that there is a need for better feedback from patients about the standards of care that they receive. That is why we introduced NHS Choices, with the ability for patients to put their comments online. However, I agree about the need for better patient satisfaction data, service by service, throughout the NHS. I have said that I want that published systematically, and a new link to payment for hospital services.
	I assure the hon. Gentleman that there is legal underpinning for whistleblowing throughout the system, and we should all do what we can to support staff who want to raise concerns about standards in their workplace.

Norman Lamb: I thank the Secretary of State for sight of the statement before he came to the House.
	It is important to acknowledge the fine work and standard of care across most of the NHS. Indeed, there will be many fine clinicians doing important work in the hospitals that we are discussing, so it is important not to tar everyone with the same brush.
	However, the revelations raise serious concerns. For example, a taskforce has been sent into Basildon, but will we get to the bottom of how the failures occurred in both hospitals so that we understand who was responsible? What about the clinicians? Each has a duty to their patients. Will they be held to account for any failures? What about the people on the board who have responsibility for patient safety? Will they be held to account?
	The CQC says that there is no evidence of another trust's being in the same category as Basildon and the Secretary of State repeated that assurance. Yet that is precisely what we were told in the aftermath of Mid Staffordshire-that it was an isolated incident. How can we have faith in the CQC's standards given what happened with Mid Staffordshire?
	Are Dr. Foster's concerns being thoroughly investigated, particularly the extraordinary statistic that 39 per cent. of hospitals have failed to investigate all unexpected deaths or cases of serious harm? Surely every case must be thoroughly investigated.
	There is now a series of cases in which there is an extraordinary mismatch between rating and the reality: Mid Staffordshire, baby P, Basildon; and eight of the 12 cases that Dr. Foster raised were rated good or excellent. Does not that completely undermine confidence in the system of regulation? Do not we end up with a state of paper safety, but not real patient safety?
	The Secretary of State will know about the NHS Confederation report, "What's it all for?", which is a damning critique of the system of regulation in this country. It highlights that more than 60 bodies inspect hospitals, with no clinical engagement in responding to all those organisations. One person would take 491 years to provide all the data to the national regulators. What has happened to that report? Are the Government ignoring it or acting on it? If they are acting on it, how are they doing that? The report highlights that several bodies nationally are responsible in some way for patient safety: the CQC, Monitor, the National Patient Safety Agency, the Health and Safety Executive. Who is ultimately responsible? Is there not a danger that no one ends up being accountable?
	We hear that Monitor has a list of 11 NHS foundation trusts where there has been a significant breach of standards, which it is investigating. The CQC is investigating a few hospitals. Dr. Foster has concerns about 12 hospitals. Are they all the same hospitals? Are the different bodies talking to each other? Have the local primary care trusts been informed in every case? Do not the public have a right to know which those hospitals are?
	Does the Secretary of State agree that ultimately openness and full information are more effective at driving up standards than tick-box self-assessment, without clinical engagement? Does he agree that it is hard to justify the increase in the pay of the chief executives at Basildon and Colchester by 15 per cent. and 11 per cent. to £150,000 when serious concerns were being raised about standards?
	Given the accumulation of evidence and that hundreds of people appear to have lost their lives unnecessarily, is not there a case for an independent investigation into regulation to consider its role, self-assessment, the lack of clinical engagement in providing data to the regulators, the role of targets-yes, they must be investigated-and that of financial incentives? Do we not owe it to all those who have been affected by the scandals?

Andy Burnham: We certainly owe it to every patient in the country to take these matters with the greatest seriousness, and that is of course what we will do.
	The hon. Gentleman made some sweeping statements about the numbers of deaths. It is important to say that the hospital standardised mortality ratio is a trigger for investigation, but I would caution him against thinking that in and of itself it gives a verdict on hospital performance. It is very important-and only fair to people working in the national health service-that we think of it in those terms. The ratio can raise questions and concerns that need to be addressed, but we should not treat it as a verdict on performance, because it is not that.
	The hon. Gentleman began by saying fairly that a good standard of care is being provided across the NHS, and it is right to remember that in moments such as this. There are 14 million hospital admissions every year and, as we have said many times, patient satisfaction with the NHS is running at historically high levels. He asked me how failures occur. Obviously, in respect of Basildon and Thurrock, that is now the subject of detailed work, and I will update the House as and when I have more information to give.
	In respect of this case, and that of Colchester, it is important to say that the regulators have said that it is not in the same category as Mid Staffordshire NHS foundation trust. It is important to make that distinction. However, that is not a recipe for complacency and it is crucial that the questions raised are properly investigated and conclusions reached and disseminated. I assure the hon. Gentleman that that is what will happen in this case.
	The hon. Gentleman asked whether every case should be investigated, and he referred to the Dr. Foster data in that regard. I agree with him that those are very important and I, too, would want to ask further questions about those data and how that finding was reached. He should know that it is a requirement of the National Patient Safety Agency for every serious incident or death to be investigated, and I reiterated that point in my statement this afternoon.
	The hon. Gentleman questioned the role of all of the different bodies commenting on such matters. After the creation of a culture of challenge and benchmarking and the use of data across the system, it is inevitable that there will be many voices in this debate, but the Care Quality Commission is the authoritative voice that this House should listen to. It was set up by Parliament to provide authoritative advice on such matters.
	The hon. Gentleman also questioned the process of self-assessment as used by the CQC. That will be the bedrock of any regulatory system, but he will know that the CQC overlays that with a range of other measures and data that it receives from a range of sources. It is that 360° analysis of what is happening at any particular hospital trust that triggers its decision on intervention.
	The hon. Gentleman also asked about pay. I acknowledge the concerns that people have about excessively high pay across the public sector, but particularly in the national health service. I know that he speaks for many people in voicing those concerns. Of course the boards of foundation trusts are independent of Government, but we wrote to them some months ago to remind them that they should set pay in accordance with wider pay trends in the public sector and, at a time such as this, they should at all times show restraint in setting awards.

Andy Burnham: The hon. Gentleman is right to refer to the strong words from South Manchester NHS trust. I do not think that there is any debate about the data that has been used, although there is some debate about the methodology that has then been applied to that data and the resulting scores. For instance, if we look at the Basildon and Thurrock trust, it scored within expected limits on nine out of the 13 measures looked at by Dr. Foster, and it scored 98 out of 100 on one of them. I do not draw attention to that in order to dismiss the work that has been done, but it is nevertheless a complicated picture and it is not entirely clear why a score of 0 out of 100 was merited. It is important to recognise that this methodology has not been used before. It is helpful that there is a process of challenge about safety in the NHS because there always should be an ongoing dialogue about improving safety, but some trusts are, I think, justified in raising concerns about this methodology if they do not believe that it fairly reflects the standards at their trusts, especially if that portrayal gives rise to undue concern among the local community. The hon. Gentleman is right that there should be a process of interrogation of this methodology, but I am sure that that will happen in the coming days and weeks.

James Brokenshire: The Secretary of State must appreciate that throughout the country there will still be considerable uncertainty as to the standards of care provided at hospitals. In his statement, on the one hand, he implied that the CQC was authoritative, yet on the other hand he said that, where legitimate concerns had been identified, they would be followed up. Can he be more specific on how they will be followed up, and assure the House about the timetable for this, so we can get some greater certainty given the information that has been provided over the past few days?

Andy Burnham: I can, indeed, give the hon. Gentleman that assurance. That is the job of the CQC: its job is both to provide regular supervision of performance across the national health service, and where concerns are identified, to intervene and ensure that the necessary action is taken. It acted in respect of Basildon and Thurrock, and because it had not seen sufficient improvement, its concerns have now escalated and it is working in tandem with Monitor. That is how the process works. Where there are concerns about other trusts, it will follow them up with those trusts. I repeat what I said in my statement: I will update the House where any action has been taken.

Bernard Jenkin: May I remind the Secretary of State that new Labour was originally elected on the slogan "24 hours to save the NHS"? That now rings all too hollow to people who rely on Colchester general hospital for their health care. Will he reflect on that? Will he also explain why he is still having to make announcements of this nature, given that health expenditure has doubled since the Government were first elected?

Andy Burnham: The hon. Gentleman has a short memory about the state that the national health service was in during in the 1990s, when people routinely waited hours on end in accident and emergency departments up and down the country. I was looking last week at the patients charter, which, in the mid-'90s, set an 18-month maximum wait for treatment and a year's maximum wait for heart bypass operations. Will he tell us how many people waiting for those heart bypasses never got to have the final operation, such was the state of the national health service in those days? Improvement has taken place in the NHS, but I say again that I do not over-claim for the NHS. When it needs to be better, I will say so and we will take the necessary action to make it happen.

Andy Burnham: May I say to the hon. Gentleman that this ratio was developed by Professor Brian Jarman, and we very much encourage its use. However, it is not of itself a verdict on a trust's performance? It is simply a trigger that then gives cause for more investigation and inquiry. In many cases, trusts that have had a high mortality rate have been able to bring it down. There may be a number of reasons why a particular trust has a high standardised mortality ratio and the circumstances need to be investigated. I assure the hon. Gentleman that those trusts will be investigated. If we need to take further action, of course, we will.

David Heath: It is not just about chief executives and managers. Every single surgeon, doctor, nurse and other professional has a professional duty of care to reduce risk. To that end, and to help them, can he tell me what progress has been made in introducing the checklist procedure for individual procedures that was pioneered in the Johns Hopkins hospital and that is shown to reduce morbidity and mortality rates? Is that being taken forward throughout the health service?

Alistair Darling: I shall come to the Bill's proposals on consumer protection, which we need to do more about. I am very much aware of the campaign being urged on us about pre-payment. We had some experience of that with the Farepak problems a couple of years ago. The provisions are not in the Bill because at this stage of this Parliament I wanted to keep the measure sufficiently small and manageable to ensure that, as I hope, it will complete all its stages before the end of the Session., That is not to say, however, that legislation on further consumer protection will not be necessary. I shall turn shortly to the measures that I propose.
	The purposes of the Bill are to build on the action that we took over the past year. We want to strengthen and reform financial regulation, as well as support better corporate governance and give more rights to consumers. The Bill ensures that prudential regulation and supervision of firms is more effective. It will place far greater emphasis on monitoring and managing system-wide risks and will tighten the powers available to the FSA on the remuneration of banks, which is important for financial stability, as well as providing consumers of financial products with better support and protection. Our central objective must be to ensure that as we come through these problems, we reform and strengthen the financial system and rebuild it for the future.

Alistair Darling: I will come to that shortly, but I should like to do so in what I think is a logical order.
	Following on from the exchanges over the past five or ten minutes or so, I have to say that it is important to formalise the relationship between, especially, the Bank and the FSA as well as the Treasury, so that we can ensure effective co-ordination. The council's draft terms of reference, which we have published today, set out the roles for each member institution. Under the Banking Act 2009, we formalised and strengthened the role of the Bank of England in protecting financial stability. We provided the Bank with a statutory objective of financial stability-it did not have that statutory objective until this year-and a lead role in dealing with failing banks under a special resolution regime. Alongside the Bank's responsibilities for monetary policy, liquidity, the oversight of inter-bank payment systems and its role in monitoring the financial system as a whole, that will give the Bank an enhanced supervisory role, as well as a role in assessing a firm's resolution plans-living wills, as they are commonly known-because it should also have that responsibility.
	The FSA, which is the single regulator, brings into one place the work of up to nine different regulatory agencies that were in place 12 years ago. As I told the hon. Member for Tatton, other countries have multiple regulators. For example, Hong Kong, China and India have separate regulators for banking, insurance and securities. The US Administration are trying to rationalise a highly fragmented regulatory model. Indeed, they are proposing a council that sits on top of the regulators because, for various reasons, they think that it will take too long to try to bring together the other regulators, even if they had congressional agreement to do so. Of course, in America many of those responsibilities are devolved to individual states, thus making the regulatory regime very complex indeed.
	By contrast, we have one regulator, and we are building on the advantages of the single regulator by enhancing the FSA's objectives and powers, to ensure that when conducting its supervision of individual banks, it takes into account the systemic risk that may be faced. That new macro-prudential element will enhance its ability to monitor, assess and mitigate risks to the country's financial stability. Of course, that sits alongside its new duties in relation to remuneration and living wills, to which I will return shortly.
	As the hon. Member for Croydon, Central (Mr. Pelling) has said, this crisis has also demonstrated the need to ensure that we have international co-operation, and we need to make sure that the Bank of England and the FSA work closely together on that. Clauses 1 to 4 will set up the new Council for Financial Stability, which will be responsible for considering emerging risks to the UK's financial stability and, as he has said, to the global financial system and for ensuring that we can co-ordinate the response by our authorities.
	The council will comprise the Governor of the Bank of England, the chair of the FSA and myself. It can draw on external expertise if necessary, but it will put that relationship on to a more formal, transparent and accountable basis. For the past 10 or so years, the relationship has been governed by a memorandum of understanding. I do not think that that is sufficient; it should formal, based on statute, transparent and accountable. The authorities can then be held to account, and we can have greater parliamentary scrutiny in the House and the other place, as we set out in clause 3. Even though I suspect that the Bill will be going through the House for some weeks yet, we will ensure that the council is established beforehand, so that we can see that it is working and publish its minutes, as proposed.
	Clause 5, 7 and 8 will strengthen the FSA's objectives, by providing it with an explicit financial stability objective. When conducting its supervision of individual banks, it needs to take into account overall systemic risk.
	As I said, and as hon. Members have mentioned, the crisis has also shown that financial stability is not contained within national boundaries. We need a strong domestic regulatory system, but we also need co-operation. Clause 8 will formalise the FSA's responsibility to work internationally and to promote effective international regulation. It has been doing that already, particularly in relation to the colleges of regulators, which have been established over the past couple of years, to ensure that some of the larger institutions that span several countries are monitored by individual regulators, so that they can see what is going on and understand the risks to which they might be exposed.
	The hon. Member for Tatton asked about Jacques de Larosière's report, which will be on the Finance Ministers' agenda when we meet in Brussels on Wednesday. The European Union is trying to establish a new European systemic risk board, which will issue non-binding risk warnings and make recommendations. I believe that that is right and entirely sensible, and we will support it. Of course, that must go hand in hand with some more detailed, micro-prudential proposals on the European supervisory authorities, of which three are proposed to deal with banking securities, insurance and occupational pensions. They will have enhanced roles, but it is very important that we recognise that some things need to be done at a Europe-wide level. That makes a lot of sense to us. For example, some of our problems with Icelandic authorities would have been more easily resolved if they had come within a regime that allowed us to get hold of the situation before it reached a critical stage. There is a lot to be said for that, but it is important that certain things remain with us because, at the end of the day in any crisis, only national Governments have the resources if a rescue needs to be mounted. That is why one of our red lines is that we cannot have a situation where any of those new authorities can impinge in any way on the fiscal responsibility of member states. It is important not only that that is clearly stated-I believe that it will be-but that the mechanisms in place ensure in reality that the responsibility for any fiscal action lies with member states. That is how it should be; it is not something that can be effected even by the Commission or any of its agencies.
	It is important that we get right the regime for who would have the power to declare an emergency. At the end of the day, that must be a matter for the European Council-the people who are elected-rather than for an agency or the Commission. It is also important that direct powers over firms are curtailed, so that such powers exist only where absolutely needed. Individual regulation must be a matter for the member state and for the Government concerned.

George Osborne: I am not claiming that anyone in the House fully understood what was going to happen. However, I did warn in 2006-I do not remember a single member of the Government saying this-that an economy built on debt is an economy built on borrowed time. The hon. Gentleman might remember-he probably put them in his election address-all those claims about having abolished boom and bust and the economic cycle: about how Britain was better prepared and how this was a new age of stability. If he does not remember, let me reassure him that over the next few months we will be reminding him and his constituents of all the things that were said.
	The crucial point is that such was the regulatory regime of our banking system, and these were the people who were supposed to understand the risks that were being run. Although it is true, as of course the Chancellor said, that other countries have experienced some very severe problems with their banking sectors-the United States, the Netherlands, Belgium and so on-there are also examples of banking regulatory regimes that got it right. The Spanish banks are in much better shape than the British banks because the Spanish central bank banned some of the off-balance-sheet vehicles that became prolific in this country. The Canadian central bank imposed a leverage backstop, which was never considered here. The Australians, whose central bank pursued a "twin peaks" model of regulation, still have four double-A rated banks. There are examples of banking systems that got it right, while it is generally accepted that Britain's was the most exposed. Indeed, this morning we heard that Canada has come out of recession, which means that Britain is the last country in the G20 still in recession. That shows how exposed we have been.

George Osborne: The hon. Lady was right first time-I am an hon. Gentleman, not a right hon. Gentleman.
	I am not claiming that the Bank of England got it right; I have said so in private at the Bank as well as in public. However, it did warn-not often enough, not loud enough, and certainly not much listened to by anyone-that, for example, the housing boom was developing at a pace that was beginning to alarm it.
	Let me explain why I think that a change in the structure of regulation, as well as its content, would help. After everything that we have been through, it is pretty remarkable that the Government are not asking some big fundamental questions about the structure of regulation that they set up. Almost every other country in the world is proposing considerable changes to its regulatory structure. As far as I am aware, only in this country, of all the major economies that had a banking crisis, are the Government content to stick with the existing system. Of course, we know exactly why that is. Everyone knows that if Labour Members were in opposition or were not currently led by the man who was Chancellor when the system was introduced, they too would be looking at changes to the structure of regulation. They are wedded to defending the current system because it happened to be introduced by the man who leads them. The proposal was developed, completely in secret, in opposition. It was, I believe, kept in a safe in the hotel bedroom of the hon. Member for Coventry, North-West (Mr. Robinson), and deployed, without any warning, two or three days after the general election. The then Governor of the Bank of England, the late Eddie George, almost resigned as a result. There was then a hasty consultation and the measure was introduced. We are now stuck with the Government defending this system for the simple reason that the Prime Minister thinks that there will some reputational damage to him if he admits that it has not worked very well. I have to tell him that the reputational damage has already been done.

William Cash: I am sure that my hon. Friend will not in any way give in on my point, but I hope that he will at least take serious account of it-I have raised it with him many times. It comes back to what I put to the Chancellor: in a situation in which majority voting prevails, if the architecture and the final decision-in other words, the control rather than who is in charge-turns on the European structure, does my hon. Friend agree that we must show today and in our debate in a couple of days that we will not fall for the argument that we do better through the City of London being in the European architecture? Majority voting means that we will be consistently outvoted. That is where the power lies and I hope that my hon. Friend accepts that that is a serious matter, which needs to be considered.

George Osborne: I agree that, having established the red lines, we need to make their existence clear in the directives and new institutional arrangements. I want the Chancellor to insist-because the issue may arise before the election-on his view that national Governments must have the final say, with the right of veto, over the decision to commit national taxpayers' resources to supporting a bank.
	I must also note that allowing the French to take the Commission job on financial services, for which they were clearly bidding from the beginning and was doubtless part of the horse-trading that ended in some of the other Commission arrangements, may turn out to be a serious diplomatic mistake. One goes only on the briefings in newspapers, but as far as I understand it, the Prime Minister and Lord Mandelson were against the appointment, we were told that it would not happen and that the President of the Commission would split the jobs. Then, lo and behold, Monsieur Barnier emerges as the person in the Commission responsible for financial services. There is an understandable French objective to get some wholesale financial services to France and away from Britain. I am not sure that that is the UK's national interest. Perhaps one day, in the Chancellor's memoirs-the bits that are not in the Bill; let us hope that there are more interesting bits-he will explain exactly how it all came about.
	Let me draw my remarks to a close with a final observation. Of course, the route to protecting the British taxpayer will never be some new banking Bill or a new European directive. What we need to deal with are the root causes of the credit crunch, and those are the huge macro-imbalances in our economy. We were not the only country in the world with those imbalances, but they were worse here than anywhere else. Lord Turner put well it in his report when he said that
	"rapid credit expansion was underpinned by major and continued macro-imbalances, with the UK-like the US-running a large current account deficit".
	The truth is our households were more indebted, our banks were more leveraged, our housing boom was greater and our Government budget deficit was larger than almost any other country in the world. The extraordinary thing is that the then Chancellor thought that this period was one of stability and an end to boom and bust. We are living with the consequences of that hubris today. It is why Britain is the last country in the G20 to still be in recession.
	So this Financial Services Bill is tinkering at the edges. We need to end the dysfunctional tripartite regime; we need a new system of regulation that puts the Bank of England in charge; we need to address the issues that the Governor of the Bank has raised; and we need an international regime better to protect taxpayers while ensuring that Britain remains competitive. Above all, we need to move from an economy built on debt and highly dependent on the success of financial services to an economy built on savings that is home to successful financial services and to other successful industries. This Bill cannot do that, and nor can this Government. That is why we need a new Government and, eventually, a new Bill.

Vincent Cable: The legislation before us today is substantial, unlike some of the other legislation listed in the Queen's Speech, and it deserves detailed attention. There is much in it with which I would agree, but we need to examine the question of whether it is all necessary, and what is omitted from it. I will probably devote more of my remarks to the latter part of the Chancellor's speech, in which he properly addressed consumer protection issues; although I agreed with much of what the hon. Member for Tatton (Mr. Osborne) said, I noted that in his 40-minute speech he did not refer once to the consumer issues, which are actually rather important.
	The Chancellor started with the big picture, and I have several broad points to make about that. We now have relative stability in the banking system after its collapse and its rescue by the taxpayers. I do not wish to repeat the history lesson that we have already had, but if people wish to read my version of it, the paperback edition will appear in the new year. It is a long story and many people were to blame, as were the leverage, the excessive complexity, the failures of regulation and so on. Although the situation has stabilised as a result of Government intervention, there is still serious risk in the system, and we have been reminded in the last few days of the potential risks for some major banks that can arise from one operator-in this case, Dubai World-going bust. There could be others out there. If there is a double-dip recession in our own economy or elsewhere-that is possible, but I am not predicting it-it will produce another round of bad debts. There are almost certainly problems with the overvaluation of the UK housing market and other asset bubbles which will appear, in turn, in the bad debts within the banking system. Many of those problems are not only historical problems, but potential future problems.
	Secondly, the big failure-as I have told the Chancellor many times-is not primarily a legislative issue but the reluctance of the Government to follow through on their ownership and control of leading banks in terms of influencing their lending policy. We had a good reminder of that last week when RBS, a nationalised bank, was able to mobilise hundreds of millions of pounds in support of an aggressive takeover of Cadbury by Kraft-as it happens, the world has moved on-while having to acknowledge publicly that it would not, by a very long way, meet its net lending obligations to small and medium companies. There has been a failure of governance by UKFI, the state directors-a failure to ensure that RBS and other state institutions meet the test of national interest. They are clearly not meeting that test.
	The third general issue, which was touched on by the Chancellor and the shadow Chancellor, concerns the structural problems. I do not want to reopen the argument about whether the banks should be broken up or not-I will leave the Chancellor to debate that with the Governor of the Bank of England, who happens to share my views on that point. Several pragmatic steps are being taken, such as the living wills proposals, the build-up of revised capital adequacy rules, which take account of very large institutions that are too big to fail and too big to save, and trying to put over-the-counter transactions on to traded markets. All those things would reduce the risk of a "too big to fail" collapse and they are all very sensible. However, most of them depend on international agreement, which could take years to happen and may well never happen.
	Perhaps I could invite the Chancellor to say whether he agrees with an alternative proposal. He may not wish to break up the banks, but as long as they remain dependent on the taxpayer guarantee, would it not be right and sensible to ask them to pay for it? I think that that is what the Prime Minister was trying to suggest to the G20 meeting until he got fixated on a slightly more populist line on the Tobin tax. I think that he shares our view that the banks need to pay some kind of fee for this continuing guarantee, until the "too big to fail" problem has been resolved-however that happens.
	On the specifics of the legislation, I turn first to the tripartite structure. It is worth quoting the Treasury Committee, which agreed on an all-party basis when it first looked into this problem. It said:
	"Although we have concerns about the operation of the tripartite system, we do not believe that the financial system in the United Kingdom would be well served by a dismantling of the tripartite system. Instead, we wish to see it reformed with clearer leadership and stronger powers."
	There are stronger powers in this Bill; the hon. Member for Tatton spoke on this point at length. I sense that there is confusion between two different issues here. One is the need for clear leadership-about which the hon. Gentleman is right-and, in relation to systemic stability, that leadership should be with the Bank of England. It is not clear that such leadership exists in the current council, because powers remain evenly distributed.
	There is a difference between the issue of leadership and that of the structuring of the bureaucracy; that is the point that the hon. Member for Coventry, North-West (Mr. Robinson) raised earlier. I cannot believe that the hon. Member for Tatton can talk to people in the City-as he does a lot, and as I do-and not know that they are deeply uncomfortable with what he is proposing. I have met many deep-dyed Conservatives-who are smacking their lips at the prospect of an incoming Conservative Government cutting their taxes-who are horrified by the proposals to change the arrangements for the FSA and the Bank of England. They advance several arguments against those changes.
	First, those people say that the proposals are causing enormous uncertainty. Staff at the FSA do not know whether they will have a job in six months or a year, they have taken their eye off the ball and are not concentrating on issues of regulation and supervision at a particularly delicate stage. I do not know where the hon. Gentleman has got the idea that the Governor of the Bank of England wants to be the supervisor of the Loughborough building society and many other institutions.
	If the hon. Member for Tatton has ever had a meeting with the Governor, he must surely have realised that that is the last thing that he wants to do, and that it would be a complete distraction from his primary responsibilities. It would also lead to duplication. The moment that integrated teams of people started working on the insurance industry-not a controversial area at the moment-some of the people would be hived off to the Bank of England and the others would be hived off into another institution and, presumably, there would be two sets of insurance regulators instead of one. That is potentially very disruptive and confusing, and it is clear to me that people in the City do not want that reform.
	I think that I am the only person in the House, with the possible exception of the right hon. Member for West Dorset (Mr. Letwin), who took part in the agonising process of legislating for the original Financial Services and Markets Bill back in 1999-2000. It was a terrible process, and I would hate to think that an incoming Government, if one were formed by the Conservatives, would inflict on us a similar piece of legislation. It is not necessary. There is one specific issue on which they are right, which is the need for clear unambiguous responsibility for systemic stability to be given to the Governor of the Bank of England. That needs to be there and it needs to be clear, but it does not require a vast moving around of the whole apparatus of the various quangos and all the people in them, which is completely unnecessary.
	The second big issue in the Bill concerns remuneration. My question is whether such legislation is necessary. Some of the things suggested seem perfectly sensible, but do we need legislation to bring them about? As I understand it, the basic principles are set out in the FSA code of practice, which was quite a weak document, introducing guidance rather than principles and removing a lot of companies from its arrangements. I would simply ask the Chancellor whether it is possible to ensure that remuneration practices are tightened up by issuing a fresh code of conduct through the FSA or through secondary or devolved legislation. Why enact primary legislation to deal with the matter, given that the FSA already has considerable powers?
	Why do the Government not use the direct powers that they already have, through the semi-nationalised industries? There was an embarrassing episode a few weeks ago when it was announced that the Royal Bank of Scotland would remunerate its highly paid staff in deferred stock, and that they would not be paid for three years. It then emerged-that is, RBS admitted-that the bank would pay its staff in cash next year, which means that there was a straightforward failure of direction by the Government's directors in the banks. We do not need legislation to sort out those problems.
	The other issue under the heading of remuneration-the Chancellor indicated that he would deal with this through a separate order-is the implementation of the Walker review. It has to be said-I am sure that this is true even among his departmental colleagues-that there was incredible embarrassment, in the Government and elsewhere, at the whitewash that Sir David Walker has produced on disclosure. The idea that what he calls high-end staff who are highly paid should not be individually identified is a very strange one, because we already have explicit exposure in several cases.
	All the pay, bonus payments and pension arrangements of directors of public companies are declared in an annual report. Even with unquoted companies, any director paid more than £200,000 a year has to be publicly declared. We have a situation, which the Government seem to have accepted, whereby if someone is paid £250,000 as, say, the finance director of a middle-sized metal-bashing company, all their details have to be publicly declared. However, if they are in a bank, not only do their individual details not have to be declared, but their existence does not have to be acknowledged. That is an extraordinary state of affairs, given that banks are underwritten by the taxpayer.

Vincent Cable: I do, but one of the problems is that what often happens if there is inadequate consumer protection in the UK and the Government do nothing about it, is that European parliamentarians then try to bring in new rules at European level, and try to deal with the problem by putting it in a single market context. I do not think that the consumer protection aspects are predominantly a European industry.
	To summarise, there is much in the Bill that is perfectly sensible. However, I would question whether some of it is strictly necessary-and if the Government are to embark on a wholesale review of the current deficiencies in consumer protection in respect of banks, quite a few key items are missing.

Geoffrey Robinson: In common with the shadow Chancellor, I would like to apologise for being unable to attend for the concluding speeches. It is a great pleasure, as always, to follow the hon. Member for Twickenham (Dr. Cable). I am pleased that he has given a general welcome to much in the Bill. Having read the Bill and on listening to today's speeches, it strikes me that a great deal will be left for the Committee stage, which is likely to involve debate over detailed complicated amendments-both wrecking and others-so I am bitterly disappointed that I have not been invited to sit on it.  [Interruption.] I am sure that those who do have that honour and pleasure will keep me well informed about the progress they are making. I look forward to hearing that some of the problems I foresee-on short selling and on other issues raised by the hon. Gentleman-are resolved at that stage.
	It seemed to me that even the shadow Chancellor, if we put aside his polemics, was broadly in agreement with the provisions and measures-certainly the objectives-in the Bill. One point on which he rather doggedly nailed his colours, his prestige and his personal pride to the mast-Labour and Liberal Democrat Members do not understand his reason for doing so-was in respect of the merger, or indeed the subordination, of the Financial Services Authority and its functions to the Governor of the Bank of England, who clearly does not want that role; at least, he has not made that clear to me yet.

Geoffrey Robinson: I entirely agree with my hon. Friend. The one consoling factor is the fact that the shadow Chancellor will not have any prospect of implementing his proposals and causing the ructions that he clearly wants to. When he prays in aid people like Jacques de Larosière and Mr. Fisher, I wonder what supernatural financial wisdom he chooses to invest in them. I would have thought, and I put this to the Minister in his place on the Front Bench, that the House, the country and particularly the City of London should be much more concerned about another French person, namely Michel Barnier-I hope I have pronounced the name correctly and apologise if I have not. He seems to me to be a greater threat to our interests than anything from Jacques de Larosière, who was governor of the rather different French central bank in a rather different set of circumstances and with a different range of responsibilities.
	I propose to look more closely to home and discuss the words of Andrew Large in commenting on the proposals. I do not want to say that he has any particular claim or any unique knowledge to be prayed in aid in any way, but he does speak with a great deal of authority, having been a former deputy governor for financial stability at the Bank of England. He wrote:
	"So I am not convinced that to split the FSA and put supervision squarely into the Bank is wise or necessary, or that it would deliver a better result than the improvements under way"-
	the improvements in the Bill that we debating now, which have been welcomed throughout the House. He continued:
	"Changing architecture involves real risks and the burdens of migrating roles",
	which I could not have put more succinctly myself. In a supplementary but relevant point, he goes on:
	"Besides this, the consumer improvements suggested by the Conservatives do not require splitting the FSA in two."
	That was one of the original responses. Here is a clear case for doing more on the consumer front by combining the two agencies that deal with consumer credit. That clear view comes from someone who knows the banking world pretty much inside out and where the precise responsibilities lie. He is saying that the suggestion is unnecessary and not worth the hassle, as it will create uncertainty and divisions, when what we need at the moment are clear responsibilities under-I very much agree with the hon. Member for Twickenham on this-the leadership of the Bank of England. That was very clearly agreed.
	I can well imagine the late Eddie George-some of us risk taking his words in vain today-giving a different impression to different people than he gave to me on the several occasions when the current and previous Chancellors and others were negotiating with him. At the end of that obviously difficult period, I remember him saying that we had come out with a very good role for the Bank of England, with a clear Monetary Policy Committee that was transparent and accountable. He made it plain on each occasion that he still retained the overall responsibility and the lead role for financial stability and for eliminating, in so far as one can, systemic risk.
	That is where we were then and I believe that that is where we still are today. Clearly, we are not going to make any impression on the shadow Chancellor, even in the emollient, consultative frame of mind that he has developed on this matter. As I have said, we have one consolation-the extreme unlikelihood of his having the chance to implement what he is proposing.
	Let me briefly deal with another important matter-the provisions for the class action for consumers. I remember the issue coming up many times with consumers when I was in the Treasury and many times since: it is simply impossible to take legal action as an individual at the moment. With the best will in the world, the financial ombudsman simply cannot cope with the problem. This is a very important new step. No doubt much of the Bill will be further clarified and amended, but I believe that that is one important change to our arrangements and we should not lose sight of it.

Geoffrey Robinson: I do not, but I will say that the hon. Gentleman has a point, and that it can and, I am sure, will be addressed in Committee. I hope that he will find his just place on the Committee, and that, when he does so, he will ensure that it deals with the matter that he has raised. I can assure him, on the basis of long experience of Public Bill Committees, that such changes can still be introduced at that stage.
	Let me return to the only issue on which I think there is currently any fundamental disagreement in the House. I refer to the idea, apparently endorsed by the right hon. Member for West Dorset (Mr. Letwin), that information flows much more easily within a single organisation than between two organisations. I will merely say that that is wishful thinking. If we followed the logic, we would conclude that the best way of eliminating the inevitable tensions and problems between the Chancellor and the Prime Minister would be to abolish one of the roles and make the Prime Minister First Lord of the Treasury, which, indeed, is his designation. That would-apparently, at least-get rid of all the arguments, but of course it would never work.
	We need those arguments. They tend to become public, and we need them to be available to the public. We certainly need them to be available to those who will make decisions based on the disputes and differences of opinion that are bound to arise. I have no doubt that exactly the same would apply to the relationship between the Governor of the Bank of England and the chairman of the FSA, in whatever guise. The idea that amalgamating them in a single organisation would get rid of those tensions, arguments and discussions is pure wishful thinking. They will still exist, but rather than emerging into the public domain they will be suppressed, and we shall have the worst of all worlds.
	Opposition Members, particularly the shadow Chancellor, should bear in mind that there will be many opportunities for compromise over the exact structure at the end of the day. The Opposition are obsessed with organograms and architecture, as parts of Government often become. Maintaining the FSA intact in terms of its organisation, its authority and its responsibilities would provide them with a simple line-based relationship: a dotted line to the Governor of the Bank of England, and a continuous, heavy black line to the Treasury. That is the sort of relationship that we want. It would emphasise the leadership role of the Governor, and it would avoid what will be a terrible mess when-fortunately in the very distant future, if ever-the Conservative party may have an opportunity to implement its proposals.
	On that cautionary note, let me end by saying that I am grateful to have had the opportunity to speak.

Stephen Hammond: I shall come on to a couple of items of substance in relation to clauses 12 and 13 that will address that very point, but Ministers cannot talk about architecture and certain things not happening given the contents of the first four clauses. They need to be clear about the following point. Given that the new CFS is to be established, are the extra powers to be given to the FSA either needed or likely to make the FSA more effective? It is not at all clear that they will make it so.
	Clause 12 on recovery and resolution plans-also known as living wills-is broadly welcomed. The Banking Act 2009 sets out the special resolution regime that allows failing banks to be transferred either to a private sector purchaser, temporary public ownership or a bridge bank. The stressful situation addressed in the Bill is less dramatic than the criteria set out in the 2009 Act. However, there is no concise or lucid definition of that stressful situation, and that needs to be provided. The explanatory notes set out-helpfully or not-the recovery plan as one
	"which aims to reduce the likelihood of failure".
	What exactly needs to be specified in that recovery plan? What exactly must an "authorised person" do? Proposed new subsection 139B of the Financial Services and Markets Act 2000 lists a lot of intentions, but very little specifics. That lack of detail is likely to undermine the good intentions behind the resolution plans.
	There is provision for both the Treasury and the Bank of England to notify the FSA if they wish to indicate that a plan is unsatisfactory and recommend action, yet the FSA does not have to undertake that action. I raised that point earlier in an intervention on the Chancellor, and I acknowledge his point to me, which was, "We're the Treasury so we're all-encompassing and all-powerful, and as we're standing behind this, the FSA will have to take account of it." If that is the Chancellor's intention, however, why does the Bill not state that? The fact that it does not and that the FSA can ignore the warnings about inadequate regimes reveals an inherent contradiction in the Bill.
	Clause 12 gives rise to two further questions. How easy will it be for complex financial organisations to comply with resolution plans? The FSA has already said it expects there to be some clashes and that it would simplify structures when a living will appears to be unworkable. I hope that the Minister will be able to reassure us in his winding-up speech on the definition of unworkable in this context, and about exactly what powers the FSA will have-and will need to have-to implement the resolution plans. I am sure the Minister is aware that the group finance director of Barclays has already indicated that it has a very complex structure of international subsidiaries and branches. In practice, how will the FSA simplify that organisation to make a resolution plan work? I am sure the Minister has the answer to that.
	The Minister also knows that the G20 believes that there is a consensus emerging on the benefit of resolution plans. I do not think there is any dispute that they are a good idea, and the likelihood is that we will see some co-ordinated international actions on such plans in the very near future. Therefore, in what ways do the Government intend to take notice of that co-ordinated action proposed by the G20? Do they intend to leave this clause in place? Do they intend to say that it will become a sunset clause, so that anything proposal from the G20 can change it, or do they intend to ignore whatever the G20 might try to set out in the framework?
	Clause 13 deals with short selling. As I am one of the Members who in a previous life worked in the financial markets, it is probably right that I resist the temptation to talk about any of the clauses on remuneration. There is an entirely erroneous myth that short selling is relatively new to financial markets, but prior to the change in the method of paying for bargains in the 1990s, the market had many operators who were known as account traders. These were exactly the same people as those who short sell nowadays; they bought stock they did not have the funds to pay for, and they sold stock they did not own. The 1990s marked the onset of hedge funds and the ability to "short", the use of derivatives, contracts for difference and so forth, and therefore short selling has become more widespread. However, do the Government accept the point of the Liberal spokesman, the hon. Member for Twickenham (Dr. Cable), which goes to the essence of this: the FSA already has powers to introduce emergency restrictions to prevent the creation, or increase of, net short positions? It also has powers to demand the daily disclosure of net short positions. Those powers were granted under section 118 of the Financial Services and Markets Act 2000. Therefore, this Bill is doing two things. It is extending the sunset clause on the powers to act on market abuse, but the power to act on short selling could be separated from the power to act on general market abuse. The Chancellor had some words to say on the Bill and the powers granted to the FSA on short selling. However, he will know that the British Bankers Association has said:
	"The placement of generalised rules on short selling into MAR"-
	market abuse rules-
	"wrongly associates all forms of short selling with abuse."
	I am certainly not the only person who has interpreted these provisions as placing, despite the separation, the short selling rules in the general market abuse rules.
	There may or may not be a case for tighter regulation, but has not the FSA already got these powers? What extra powers are needed? Do the Government accept that short selling is not intrinsically a market abuse? Short selling enables financial firms to offer hedging and market-making facilities-indeed, it allows essential market liquidity. Making liquidity in both the London markets and the international markets means that markets function. We have seen that when markets seize up that has direct economic repercussions. Do the Government accept that short selling is a tool that is not intrinsically wrong or an abuse, but just a financial tool? What is wrong or abusive is how it is used in some circumstances.
	Is what the Government are doing in this Bill merely an admission that the FSA has failed to use its existing powers? A lot of market participants take that view of the Bill and think that there is no need for a general extension of those powers. The FSA's statement of September 2008 was extensive and inclusive, and the necessary powers appear to be in place. The Minister must be clear tonight as to why these proposed powers are necessary. I am grateful to have had the opportunity to make a few brief remarks. Unlike the hon. Member for Coventry, North-West (Mr. Robinson), I am grateful that I will not be on the Committee, but it will explore a number of these issues.

Mark Todd: I do not know whether I shall be serving on the Committee for which some people are volunteering and on which others will be extremely disappointed not to be serving. It will consider a portmanteau Bill containing a wide range of issues relating to financial services. Thus, the hon. Member for Twickenham (Dr. Cable) reasonably said, "Well if it is such a bag, let's see what other elements might be stuffed into it." The Committee will almost certainly have before it a number of amendments suggesting the inclusion of a variety of measures, particularly on consumer protection, that might be useful.
	May I run through some of the issues in which I have been particularly interested, the first of which relates to the Council for Financial Stability? I serve on the Treasury Committee and I subscribe to the opinions that it expressed: that this would appear to be a rebranding exercise, unless far greater detail is given about how this body will function. The Bill is silent on that-we will doubtless hear more in Committee. Those who miss that experience will miss out on the detailed exposition that might be given.
	One of the difficulties that we face is that at the start of this crisis no institution explicitly had responsibility for financial stability, but now everyone has. The Financial Services Authority has been given it-or it will be given responsibility, should this Bill pass into law-and the Banking Act 2009 gave it to the Bank of England. I am not sure that that makes us feel much safer, partly because when everyone shares a responsibility, it is not entirely clear who is genuinely answerable for decision making-I shall discuss that later.
	Secondly, I am not sure that we are very clear on what financial stability actually means. We know when it is absent-that is easy to work out; we have been through a period of obvious financial instability-but it is not entirely clear how we define "financial stability" and how we learn, institutionally, of the threats that there might be to it, which will not be identical to the ones through which we have been recently.
	In any institutional framework-be it this tripartite system or the system that the hon. Member for Tatton (Mr. Osborne) proposed-the things that most concern me are how exactly it will work, and how information flows and how the allocation of the tools and responsibilities for dealing with crises are addressed. This is one of the areas where the Governor of the Bank of England has been perfectly fairly pressing the political class in this country to define its positions more clearly. If we are to allocate responsibilities for financial stability, the crucial element is to work out who does the various tasks. We are still searching for firm answers on that.
	One of the issues that concerns me most is information flow. If the FSA retains, as I believe it should, the regulatory responsibility for financial institutions in this country, the information gathered will be a crucial part of the Bank of England's carrying out of its financial stability responsibilities. I am not entirely clear that that information flow works correctly now; it is not built into law in the 2009 Act. I, like those who sat through that Committee stage, remember some discussion about whether it might be included in the legislative obligations attached to the FSA and passed through to the Bank of England.
	My second area of concern relates to who exactly makes the decisions. There are trigger points during a crisis at which it is clear that one person provides information and another says, "This is what we are going to do." I am always uncomfortable about such a process. We still have some refinements to make on this.
	The hon. Member for Tatton has departed to the event that will keep him away from the wind-ups, so I shall have to address the hon. Member for Fareham (Mr. Hoban) in the hope that he may pass this point on. The hon. Member for Tatton gave an exposition of the support that he appears to be getting, but some of that comes from those who, as I have said, are naturally looking to their own futures and wish to make positive remarks to what they see as a possible Government in waiting. If I were in such a role, I would not want to be dismissive or rude about proposals put to me by an Opposition who appear to be leading in the opinion polls. We have to understand human nature.

Christopher Fraser: I am listening carefully to the hon. Gentleman, but does he acknowledge that the lack of co-ordination among the tripartite authorities, as has been described, has contributed to the severity of the financial crisis through which we are going?

Mark Todd: On that, I would side with the hon. Member for Twickenham by saying that structures do not necessarily clarify responsibility or improve communication.
	I am leaving this House at the next election, so I do not mind saying one or two things that I might not have said on another occasion. I went through the painful process of observing health service reform, as I suspect that we all did-certainly those of us who have been here since 1997-and the obsession with structural reform in the health service is an exact example of the atrophy that can be produced if that obsession is followed through. We end up freezing people's actions for a period; they worry about their careers and try to work out where they will be doing their jobs and how they will carry out their responsibilities instead of doing the things that we genuinely want them to do. The Government have not been guiltless of an obsession with structures. I advise the Opposition, should they have the opportunity to implement their plans, not to follow those obsessions.
	Let me turn to other positive elements of the Bill. I will be very surprised if anyone pops up in this debate and says that living wills are an unwelcome proposal. There is an issue with quite how they will be implemented, but I would probably argue with the hon. Member for Tatton, were he here, and say that part of the exercise is to tighten corporate rigour over the understanding of the structures and risks. One of the difficulties that we have seen is the extraordinary engineering that sometimes goes into corporate structures in the financial sector, which is perhaps lost on some of the board, too. An attempt to force companies into at least applying rigorously an understanding of how their organisations fit together and therefore how they might be deconstructed at some stage in the future, should it come to that, is a helpful process that they should have to go through. Yes, it is tiresome and possibly bureaucratic, but it will possibly also expose areas of uselessness and pure engineering in an activity rather than areas of functional need. It is certainly useful for the regulator to understand that process, too.
	That is only one element of addressing the issue of whether such institutions are too big to fail. I, too, take the view that capital and liquidity obligations are almost certainly the key element of dealing with the "too big to fail" argument. However, I do not rule out the approach that the Governor of the Bank of England has, I think espoused-if we do not force the break-up of these institutions, we should at least structure them in such a way that taxpayer risk is more confined. If one chooses a corporate model that includes a retail bank and an investment bank structure, we should at least have some means of limiting the taxpayer liability to the service element of the banking institution that we are supporting. Such a provision is worth considering and is not developed within the Bill.
	When it comes to improving corporate governance, although it is certainly true that there has been regulatory failure-those who do not think that should look at the internal audit report that the FSA produced after Northern Rock-there has clearly been behavioural failure too, which is not the responsibility of regulators but is possibly to do with the nudges, to use the fashionable term, that we try to apply to prompt appropriate action among those who are carrying out functions in our society. I assume that the new powers on financial reporting, which I believe that the Treasury will be taking, will address the Walker recommendations on risk committees, giving them a separate reporting stream in corporate governance. Perhaps we will hear more about that in Committee.
	Although the regulation of remuneration, which many have commented on already, is certainly popular, it has a rather muddled parentage. In considering this Bill, we should be concerned about whether high bonuses or pay should be subject to regulation only if they increase the risk of the institutions. That is how they should be considered; it is not for this House to consider in this Bill whether it is equitable to pay people staggering amounts for carrying out their tasks. There is a question about whether society should permit that and whether people should be taxed more, but that is a separate issue that the House should certainly consider but in a different context.
	Our decision making on that should be informed by, but not wholly governed by, competitive pressures. We are too easily persuaded by financial institutions saying, "If we do this, all these people will wander off and go to the United States, Switzerland or wherever else they think it might be advantageous to go"- [ Interruption. ] I am not saying that we should ignore it. We should be informed by it, but not necessarily governed by it. One point that we should be governed by, which is important and that again came up in the discussions on the Banking Bill, is the fact that we should not threaten the contractual nexus between an employer and an employee.
	One element of this Bill, cited by the hon. Member for Tatton, touches on what the Government might intend if they outlawed certain pay and remuneration practices. Although I would not subscribe to the view that our problems have stemmed wholly from a failure of regulation, there are ways in which we can encourage rational and prudent behaviours and discourage the opposite. These include addressing remuneration models and strengthening risk governance and reporting. They should also cover strengthening the capability of non-executives and the robustness of the relationship between shareholders and the board.
	One of the saddest elements of listening to the evidence given in the Treasury Committee has been listening to banks talking about their interaction with shareholders. Perhaps the most telling remarks were those made by representatives of HSBC, who related how they were strongly criticised by shareholder representatives for their conservative models of banking. Shareholders also totally ignored some of the evidence that lay before them of extraordinary risk: the ABN AMRO acquisition was endorsed by RBS's shareholders. It is worth thinking carefully about how shareholders can be better empowered and informed in making critical decisions about their interest in companies.
	Let me turn to clause 6, which has not yet received any attention and which covers the education role of the FSA, establishing a new consumer finance education body. I strongly welcome the operational separation of the FSA from the education function and the broadening of the governance of that critical activity, which I take to be the implication of setting up the board. Presumably, the body will absorb all the FSA's function in consumer education, including the work carried out by PFEG-the Personal Finance Education Group-in schools. It is worth commenting on the FSA's view of how it carries out those functions now.
	In an exchange between Lord Turner and me in the Treasury Committee last week, I pointed out that the FSA had certainly caught "targetitis". A huge scree of targets have been set for achievement in financial education, but if one glances through them to try to make sense of their qualitative elements-in other words: what difference are we making by doing what we are doing?-the report is almost entirely silent.

Mark Todd: The hon. Gentleman raises an interesting point, on which I cannot enlighten him. I can say that if one glances through appendix 7 of the FSA's annual report, one finds an example of the way it reports targets. It was set a target of reaching 516,000 children in England with a learning money matters project and reported that it had exceeded the target by reaching 742,500 children. As far as I can tell, that figure seems to be the number of schools to which the FSA sent material multiplied by the number of pupils who were presumably in those schools, so one wonders whether the word "reach" is appropriately applied to such a limited and-from what I know about the distribution of the packs-doubtful link to a school institution. There is a lot more. I picked only the first two targets.
	A lot of money is being spent on that objective and more is to come, so clear quality indicators are required, showing what difference has actually been made by providing those services. No one doubts that providing financial education for children and for consumers at large is very important, but what I have seen is of relatively limited quality. Quite often it is fancy stuff; as an MP, I should be proud to give it to constituents, but I wonder whether they would actually use it. I have repeatedly raised concerns about the issue, but have not been satisfied, so if the measure improves the governance of the programme, I shall be delighted.
	Finally, I welcome the measures on facilitating collective proceedings by consumers. It is an important step. I note the concern of the banking industry and its opposition to the proposal, but I merely note it-they would say that, wouldn't they? We should obviously listen carefully to detailed representations, but we should press ahead on the principle. We are dealing with complex products and services, and without the aid of a representative body the ordinary consumer at large is often ill-placed to pursue a complaint against a financial institution. Giving consumer groups a clear role would leave far less to the chance that well-informed and resourceful consumers will sometimes win through in the end. I represent someone who has been fighting their way through energy issues-an almost equally complex area-and it is a delight to deal with someone who is really getting to grips with the detail. However, the experience has left me feeling that vast numbers of people do not have the time, expertise or will to go through such a process. That definitely applies to the financial market, so if collective action is to be the first step, I welcome it.
	There is a lot to welcome in the Bill and I very much hope that we will be able to pass it before Parliament is dissolved.

John Howell: I do indeed agree, and I thank my hon. Friend for his intervention. I will say something about that in a few moments.
	The Bill does nothing fundamental about those issues, as is demonstrated by the fact that it has at its heart the preservation of the tripartite system, albeit that that system will be enhanced by more regulation. I was interested in the comment by the hon. Member for Coventry, North-West (Mr. Robinson), who is no longer in his seat, that there is risk in changing the financial architecture. I agree; indeed, there was a risk in changing the architecture to the tripartite system in the first place, and the results are now coming home to roost. The question is not whether there is risk involved, but how that risk is managed. That goes to the point that my hon. Friend the Member for Tatton (Mr. Osborne) made about how the new structure would look under a Conservative Administration.
	As so often with this Government, there are only two tools in the toolbox. The first is the target culture, which is seen here in the role of the FSA, and is pursued elsewhere through the declaratory legislation of the Child Poverty Bill and the fiscal responsibility Bill, which will encourage special interest groups to drag the Government through the courts when targets are not met, until economic policy decisions will inevitably be taken by judges rather than Parliament.
	The second tool in the box is regulation, of which the Bill before us promises much. As with so many other Bills that rely on regulation, however, we debate it in a vacuum and we do not get to see the regulations into which the substance of the Bill has been hived off-sometimes not even in Committee. I therefore ask the Government to outline the timetable for producing the draft regulations associated with the Bill-particularly those on collective proceedings-and to ensure that they will be available to the Public Bill Committee, because I am volunteering to serve on it, given the fundamental nature of the Bill.
	There is every indication that the Bill has been rushed through without as much thought as it deserved, notwithstanding the recent White Paper. Although there was consultation on the White Paper, I am struck by the number of organisations that have complained at the lack of consultation on the detailed proposals in the Bill. Clifford Chance makes that clear in an article in  Lexology on 24 November, in which it says:
	"There was relatively little consultation on the proposals...and there was a limited opportunity for interested parties to debate them."
	Maggie Craig of the Association of British Insurers is quoted in an ABI press release as saying that she is
	"alarmed this is being rushed through without proper consultation with industry. This is too important not to get right."
	The lack of consultation is implicit in the comments from PricewaterhouseCoopers partner Jon Terry about the unintended consequences of the clauses about the power of the FSA for contracts, and about the distraction that those could cause when it comes to ensuring that risk is properly taken into account.
	As other hon. Members have asked, why do we need a law to bring the Chancellor, the Governor of the Bank of England and the head of the FSA together, when there is a mechanism for doing that already? The answer was provided by a nameless Treasury spokesperson who was quoted in the "FT Adviser" website article. We now find out why the Bill is required. He is quoted as saying:
	"We will be replacing the existing structure of the Tripartite arrangement where we meet strictly on an ad hoc basis and never publish any minutes of our meetings and never reporting to Parliament. Now they will be formalised and just like the Monetary Policy Committee they will have formal minutes."
	Well, there we have it-the real purpose of the Bill and its real impact. The Bill is required because the Chancellor, the Governor of the Bank of England and the head of the FSA cannot keep minutes. The real title of the Bill should be "A Bill to make provision amending the Financial Services and Markets Act 2000 and for the installation of good practice in minute keeping by the principals in the tripartite system."
	I am sure that we will all now feel much safer because of that-but things get worse. The Government's response to the House of Lords Economic Affairs Committee recommendation on the new tripartite system is that the new council will replace the existing memorandum of understanding. It clearly has no real Executive functions. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said earlier, this is nothing more than a rebranding. It fails to address the serious concerns raised by many people, such as Professor Wood of the Cass business school, that
	"the tripartite structure is fundamentally defective."
	He continued:
	"Everyone made mistakes...but it is quite clear that the actual structure of the regulatory system was not satisfactory before the crisis."
	So I am left with four questions for Minister to answer on that part of the Bill. First, does he not accept that there was at best a lack of co-ordination between tripartite members, and does he really believe that the Bill will fix the problem? When meetings are so formal and the structure so inflexible, how will the system operate in a crisis? Any company that faces a new structure will at least have done some comprehensive modelling of what the new structure would be like, and those who take a proper risk approach will have done some modelling of how it would work in a crisis. Surely we should expect the same diligence to be undertaken by the Government in relation to what they propose in the Bill.
	Secondly, does the Minister accept that the Bill will introduce more ambiguity about where institutional responsibility lies? My hon. Friend the Member for South-West Norfolk (Christopher Fraser) asked that question in his intervention. Thirdly, does he accept the advice from the House of Lords Economics Affairs Committee that
	"for crisis management to be effective, it needs to be clear who is in charge",
	and also accept that the Bill does not answer that question? If he is unwilling to listen to advice from the Opposition, is he willing to take on board the comments of the CBI, CMS Cameron McKenna and the Association of British Insurers about the remaining confusion of responsibilities that the Bill will create?
	The CBI says:
	"A disadvantage of giving the FSA an explicit objective for financial stability is that this would perpetuate some of the ambiguities regarding institutional responsibilities that were apparent in the build-up to the financial crisis."
	Cameron McKenna says that this
	"is old wine in a new skin-merely another way of expressing the existing Tripartite authority which has not delivered the stability that is needed."
	ABI says:
	"We are concerned that the proposal to give the FSA a financial stability objective will exacerbate the confusion of responsibility between the Bank and the FSA".
	Finally, does the Minister accept that the new role for the FSA that the Bill proposes is a rebranding exercise, without any meaning without more fundamental change? How else are we to interpret the Government's response to the House of Lords Economic Affairs Committee recommendation at paragraph 115, about the need for executive responsibility? How else are we to interpret the Government's response that the Council for Financial Stability will work essentially by reviewing publications about the problems that are happening? It does not sound as if a dynamic institution is being suggested. This is the time to give power for macro and micro-regulation and responsibility for financial stability to the Bank of England, so that we know that somebody competent is in charge.
	There are two other areas on which I would be grateful for the Minister's comments in his winding-up speech. It is clear that the need to ramp up consumer protection issues so much in the Bill is an indication of a failure to take consumer protection into account in the tripartite arrangements that were put in place by the Prime Minister. I welcome a focus on the need for consumer education. There are 9 million people in the UK in serious personal debt, and British consumers are twice as indebted as people in the rest of Europe. There is very little financial education around-so little that a MORI poll from 2004 showed that only 30 per cent. of people could work out a simple interest rate calculation.
	It is not only people on the lowest incomes who are likely to enter into serious personal debt. High debt can push people on higher incomes into poverty, too. We know that there is a circular link between personal indebtedness and social problems, and that debt is a cause of social problems. Recently, the Save the Children campaign calculated that the present recession has caused 5.2 million households to be classed as sub-prime, and 25,000 consumer credit applications are turned down every day.
	It surely defies credibility that financial education should come from the FSA, given its record in the present crisis. I tend to agree with the British Bankers Association that this should be dealt with elsewhere and should be more fundamental. That is why our proposals for a strong new consumer protection agency are so important, setting it out as a champion for consumers.
	I remain concerned about the practical implications of the use of the courts proposed in the class action proposals. Given that the courts are likely to be snarled up by judicial reviews of Government economic policy, one wonders whether there will be any room for consumer cases to be heard at all. But this is a serious issue and many commentators have commented on the fact that the proposals will create a US-style litigation culture. It would therefore be good to hear from the Minister what work has been done to show that that culture in the US has benefited customers, and what lessons have been learned by the Government in framing the Bill and the regulations that will come with it.
	This is an area that would have benefited from wider consultation, to ensure balance if nothing else. I would like to hear more about how the Government see the balance which will be required between the responsibilities and the rights of consumers.
	I want to ask some questions of the Government about how the Bill will relate to emerging regulations from the EU and the direction of travel in relation to the G20. I listened with great care to what the Chancellor said at the beginning of the debate about the red lines and the connection with regulation. I am not yet convinced that any of us understands precisely how those red lines will work, or how the Government's stance in the Bill will be taken forward.
	I have two issues in mind. As the Minister knows, the Commission issued a Green Paper on collective redress, setting out a number of options for settling large-scale consumer complaints. That was followed by a period of consultation earlier in the year, which produced conflicting results not only on whether collective redress was desirable, but on how it should be implemented. I understand that some leading European lawyers have questioned whether, under EU law, there is a clear legal basis for consumer collective redress. I am therefore keen to know to what extent the Government have taken into account the Green Paper and the underlying consultation, and whether their proposals conflict with European law.
	In September the European Commission adopted proposals aimed at addressing regulatory weakness at micro and macro-prudential level through the creation of a European system of financial supervisors and a European systemic risk board. The Chancellor covered some of that, but I would still be grateful if the Minister who is to wind up could say what the relationship will be between what the Bill proposes and what the Commission proposes.
	Looking more widely at the implications in terms of the G20, concerns have been expressed that the speed with which the Government are acting in the Bill, in advance of similar proposals from other countries, is a distinct competitive disadvantage. That has been expressed mostly in terms of the power to control remuneration contracts, but also in terms of creating living wills. The CBI has pointed out the need for the consistent action that other countries are taking if we are to avoid damaging the UK's competitiveness, and PricewaterhouseCoopers has commented on how the provision as drafted may catch others whom it was not originally intended to cover. Indeed, Lord Myners dismissed that with a rather populist phrase about curbing "reckless greed", but I hope that the Minister will treat the subject more seriously and tell us how the proposals go further than merely treating the symptoms of the disease, and get to the heart of the cure, which would involve a complex culture change in the appreciation of risk-a much broader and more complex subject.
	The noble Lord dismissed concerns that the UK's unilateral action would be contrary to competitiveness, stating that it was
	"setting the trend and direction of global thinking",
	so will the Minister tell us the likely time lag between our leadership of global thinking and others catching up and putting the same proposals into operation?
	All that is important because of clause 8, which imposes a duty
	"to promote international...regulation and supervision".
	It also includes a duty in terms of
	"the desirability of maintaining the competitive position of the United Kingdom in respect of financial services and markets."
	The Library research paper on the Bill points out very effectively that the FSA is already involved in the promotion of international regulation and supervision. The paper notes that
	"around 70 per cent. of the FSA's policymaking effort is driven by European initiatives, including the Financial Services Action Plan".
	It also discusses the way in which the FSA already participates in other international forums, including
	"the Basel Committee, the International Organisation of Securities Commissions, and the International Association of Insurance Supervisors".
	After reading clause 8, and after listening to what the Chancellor said about the relationship between the UK and the world in his opening speech, I am therefore left with an overriding question about what, additionally, the Bill delivers and what scope and tactics-strategy might be too big a word for it-the Government have in place to deal with international regulation and supervision as part of their overall approach to the supervision and regulation of the financial services industry in this country.

Derek Twigg: I welcome the Bill, which will give consumers more protection, an issue that I shall dwell on in my speech. The legislation will also empower the FSA and the Government to introduce tougher regulation of banks and their risky practices; better protect the taxpayer; importantly, restore consumers' confidence in financial services by providing people with greater protection and education; and, very importantly, provide powerful and easier routes to redress, when consumers have suffered widespread detriment.
	Although we might be discussing how we will create better regulations to give the consumer more protection, we should not forget the impact of the banking and financial crisis on constituencies such as mine and the human cost, which is so often lost when we get to the detail of such Bills. Over the past year or two, unemployment has increased more rapidly in Halton than anywhere else in the north-west bar Knowsley. Recently, the unemployment rate has slowed, but it continues to affect many families and individuals in my constituency and elsewhere. People have found themselves unemployed for the first time. Indeed, one constituent told me that, until recently, he had not been unemployed in 38 years.
	Many poor people have fallen into debt, something that we are discussing as part of the Bill, and many have had their houses repossessed. We should not forget the impact on businesses, particularly small businesses. All that, of course, was caused by the incompetence and greed of bankers and financial institutions.
	On executive remuneration, my constituents have raised with me the issue of greedy bankers and bank bonuses. Of course, I am not talking about the ordinary bank workers in the offices of local branches but those who take the decisions and make the big salaries. It is hard to ignore the link between the risky activities of companies at a corporate level and an incentive structure that rewards such risk-taking at an individual level. Knowing what we know now, it seems remarkable that the financial institutions and those who had responsibility for managing them did not recognise and understand the risks they were taking on and were unable to prevent the consequences or to put in place plans to deal with them.
	I am pleased that the Bill gives the FSA new powers on bankers' pay. Importantly, it also gives the FSA the power to rule that employment contracts not compliant with the code are void and unenforceable, and to make provision for the recovery of any payment made under a void provision. There must be more transparency on the disclosure of remuneration and pay bands. Irresponsible behaviour has to be changed. I welcome the increased supervisory and information-gathering powers and punitive measures.
	The provisions on the disgraceful practice of sending out unsolicited credit card cheques to consumers are particularly welcome. There is no doubt that that can encourage people to take on more debt when many are already in financial crisis, and I am pleased that the Government will legislate to ban that practice. We have seen the usual bad practices with small-print conditions-for example, the interest rate applying to payments is not clearly stated in all cases, and it is sometimes not indicated that using credit card cheques to make payments means that cardholders do not have any redress against the credit card company. I welcome the intention to make it an offence for a credit card issuer to send credit cheques to a customer other than in response to a request from that customer.
	Excessive bank charges have been the subject of ongoing discussion, particularly with the recent court ruling. That problem has to be dealt with, and I would prefer the Government to take more regulatory powers in order to do so. We should take action on unsolicited credit card limit increases that just appear through the letterbox. The practice of changing the interest on monthly credit card payments will particularly affect young people and get lots of them into debt.
	I very much welcome the proposed establishment of the consumer financial education body and the provision of guidance on money. Several hon. Members have mentioned the importance of education on consumer credit and financial management. Consumer education and awareness is a key part of the Bill. Citizens Advice welcomes the establishment of the consumer financial education body, saying that it is a step change that will benefit consumers enormously. The work of citizens advice bureaux in delivering financial education has demonstrated the appetite and need for such training and the quantifiable improvement that it makes to people's confidence in dealing with their financial affairs. For example, according to Citizens Advice, 38 per cent. of clients who took part in the Save Xmas financial education sessions funded by the Office of Fair Trading said that they had since made changes to how they save.
	From October 2008 to September 2009, citizens advice bureaux dealt with more than 2 million debt problems-an increase of 21 per cent. on the same period in 2007-08. I pay tribute to citizens advice bureaux, particularly the branch in my constituency, which does an excellent job, and with which I work very closely, in helping people in severe debt or other financial difficulties, which have been exacerbated by the economic downturn. I particularly commend its volunteer programme. I am pleased that the impact of debt on health is being further highlighted. That is why the primary care trust in Halton has been funding debt advice in addition to the money that the Government are putting in.
	A few months ago, I met representatives from the Resolution Foundation, whose aim is to improve the well-being of low earners by delivering change for that income group, who are currently disadvantaged. The foundation identified that low earners fall into an "advice gap" whereby commercial advisers focus their attention on the better-off, and the third sector and the Government focus on the most vulnerable. Its research found that a low earner in receipt of money guidance could be £60,000 better off by the age of 60 by making sound financial decisions throughout their life.
	A poll conducted by the foundation in March 2009 found that nearly 3 million low earners worry all the time about their personal finances-double the number in a similar survey in 2007. The CFEB will increase the profile of money advice, the wider financial capability agenda and general financial education that so many people badly want to see. It will also be able to raise funding from a variety of streams, with no extra administrative burden on financial services.
	Short selling has been mentioned. It has been an area of great concern at the outset of the crisis and since, and there is some discussion about how it should be regulated. I think it right that the FSA should have a power to place a restriction on short selling and require its disclosure. An independent power dealing with market abuse is very important, but I would like Ministers to provide further clarification, because points have been made about how such a power will be incorporated in the Bill and actually improve the situation. I continue to have serious concerns about short selling. I understand the benefits that it can bring, but we have seen far too much of the disadvantages of that practice, and I would like some more information on it.
	Increased supervisory powers, information-gathering and punishment are key measures that I support, but I also welcome measures to enable consumers to obtain redress and compensation more easily in cases of widespread consumer detriment.
	I want also briefly to mention banks and bank lending. I know that there is a view that some banks have improved, but I still get constituents and businesses coming to me to complain bitterly about the banking system and how it does not help small businesses, particularly regarding lending. I am not suggesting that we have to put such regulations in this Bill, but we should consider the issue.
	I welcome the Bill's main proposals, but there are certainly other areas, particularly those affecting consumers, that we need to look at. I hope we can discuss them at a later date.

Sally Keeble: I welcome the chance to speak after the hon. Member for Cities of London and Westminster (Mr. Field) who obviously has the interests of the financial services sector at the heart of his constituency. In my constituency, we have part of Nationwide, and Barclaycard is next door, so I also have a strong financial services lobby. All of us of course also have constituents who are entirely dependent on the maintenance of a secure financial system, both for their own jobs and for financial services, such as pensions and mortgages. For that reason, although this Bill is phenomenally technical, it goes to the heart of what our constituents want to see happen, and that is why it is right that the Government should include it in their legislative programme.
	The Government have to introduce the measures that they think right, and I agree with the separation of the Bank of England and the FSA, as set out in the Bill. The Government should not look to the pending election and ask "What are the policies of the Opposition?" and, depending on the answer, do nothing or do what they say. The Government should persist with the course of action that they think fit.
	The origins of the debate, dating back to 1997, were mentioned at the outset. That was when the supervision of the banks was taken away from the Bank of England. It has been talked about as if that was the only thing that happened on that occasion, but it was not. The key factor was the Bank of England being given independence and control over the setting of interest rates. That was a phenomenally powerful tool to give the Bank, which had previously been jealously preserved by the Chancellor. It was a profound decision that affected all our constituents. Giving those powers to the Bank of England was a dramatic move and one that proved to be extremely successful. Control over interest rates was the key to controlling inflation, which at the time was the public financial enemy No. 1. It made perfect sense to transfer that power, and the FSA was then set up to deal with the regulatory issues.
	Over the years, we have had debates about what was done, and questions were asked about the wisdom of some of the moves. I have been on the Treasury Committee for four years, so I came in at the tail end of some of those debates. It was when things were starting to get a bit bumpy, because we had big debates about asset prices, especially property. Most of those debates, and the pressure put on the Governor, came from Members of Parliament, especially my hon. Friend the Member for Edmonton (Mr. Love). I did not tell him that I intended to mention him, but as I am flattering him, I hope that he will not mind. He repeatedly pressed that issue.
	We also had a lot of discussion about the dislocation of the bank's rate from the interest rates as all of our constituents experienced them, especially over the past 18 months to two years. There were strong debates about the difference between the consumer prices index and the retail prices index, and why the public did not agree with the Governor's view of the rate of inflation. Many of those issues were a start in considering whether the system as set up in 1997 would hold for the next 10 or 20 years.
	In fact, quite often over the past few years, the Select Committee almost got to the point of spotting what would lead to the collapse. When we looked at some financial products-we looked at collateralised debt obligations, or CDOs, but not CDOs squared-questions were asked about their construction, what they meant, what underpinned them, what their creditworthiness was, and so on. However, we did not push as hard as was perhaps needed to see what was happening. The Governor certainly never warned of exactly what was happening. I noticed that although the hon. Member for Tatton (Mr. Osborne) referred to asset prices, he did not read out any clear warning from the Governor- or, indeed, from anyone else-about the scale of the collapse that was coming down the line; and indeed, the FSA chair and chief exec at the time did not warn about it either.
	When the collapse came, those of us on the Select Committee virtually had a ringside seat. The tripartite authority was caught out, albeit not because of anything inherent in its structure, but because of the speed and scale of the collapse. People could see the asset price bubbles and the complex financial products, although nobody quite knew what was in those products. Indeed, at one Committee meeting I remember people talking about how they would unwrap a layer to see what was under them, find that there was nothing at all and then pass them on as quickly as they could, before they ended up on their books.

Sally Keeble: I completely agree. There have been issues about what happened. The question that I was working towards is: how do we put it right? Everybody agrees that things went wrong, and everybody agrees that when the crisis came, the tripartite authority did not manage to resolve the issue in a very clever fashion. We heard all the accounts and all the evidence is there in the reports. The primary issue was not so much that the people involved were having a bust-up, but that the speed, scale and unexpectedness of the collapse caught everybody by surprise. In particular, as soon as the collapse hit the public and they started the run on Northern Rock, a domino effect could have moved quickly through our financial services, had the Government not also moved quickly, which they did. They did so after the collapse of Lehman Brothers as well.
	Given what happened, how do we put things right? I do not see that as a huge party political dividing line; I see it as a matter of trying to work out a sensible way to deal with what was a huge problem. However, just to say, "The relationships are dysfunctional; therefore we have to abolish or change everything," as the hon. Member for Tatton did, is not something that I buy into. That was the bottom line of his arguments, and I simply do not accept them. A number of issues have to be dealt with or thought through before we start talking about dismantling the FSA-or rather, not so much dismantling it, but tacking it wholesale on to the Bank of England.
	First, there are serious conflicts of interest in having an organisation that uses the monetary policy tools that the Governor now has at his disposal, including quantitative easing, and that also supervises the banks. We could create Chinese walls and separations within the organisation, but given the importance of the subject and the order of the issues being dealt with, it is much better for those different functions to be more clearly separated.
	The second thing-it has grown out of the crisis and we have all had to learn about it-is that the public are now much more demanding about scrutiny and transparency. The hon. Member for Twickenham talked about the banks' obligations on lending rates, which have not been restored to what they were. I do not think that the public are going to accept that one organisation, although it has responsibilities to report to different organisations, is likely to have the most wonderful culture of openness and scrutiny by the general public. I do not think that it will provide the kind of openness that the public will demand for the next 10 to 20 years.
	I always remember the time when the Governor came before the Select Committee to talk about what was happening with Northern Rock. He spoke in terms of, "If only the Bank had been able to carry out a covert operation". I had visions of somebody with a big bag of cash running out of the Bank of England towards Northern Rock, and I wondered how on earth that could be done in the modern day and age. Just recently, of course, the Bank has managed to carry out such operations, which is quite remarkable. It is interesting that the debate then starts to be about where the public accountability, scrutiny and answering lies for what the Bank and others are doing with public funds. We need a structure that will allow us to answer those questions. Splitting the FSA into separate organisations will not help; it already has a culture of openness that will help it to provide better answers.
	Placing all the functions into just the Bank creates the problem that it might become too big an organisation. We have all talked it being too big and too important to fail and all the rest of it, but having one body deciding quantitative easing, interest rates, the education of the public, bank supervision, old Uncle Tom Cobleigh and all involves too many functions for one organisation.
	Most importantly-this explains my question to the hon. Member for Tatton, and both the Governor and the FSA said this-the issue is not just about who sits where but is about what they do. Although there has been much discussion about reorganising structures, we also need to discuss the new tools that can be used to fix the current problems. It is much better to improve the structures we already have and focus on getting tools-other than the capital ratios that everybody has talked about a great deal-to try to tackle the problems we are going to face over the next 10 to 20 years.
	Apart from that, there some very important measures in this Bill, which go right to heart of the public debate. People have talked about bankers' pay, which is a major public concern. There is also a real awareness of the importance of the international regulations. I was pleased to hear my right hon. Friend the Chancellor speak about them in his opening address. I was particularly pleased to hear what he said about the credit ratings agencies-some of the real culprits in all this when they went on advising people about putting together hopelessly complex products and provided ratings for them. That then encouraged people to sell them when they were, in fact, houses of straw. I also greatly welcome the measures on consumer protection, particularly on the credit card cheques, in respect of which many hon. Members of all parties have campaigned for extra controls.
	Nobody has mentioned clause 29, which I am particularly pleased to see in the Bill. It gives extra powers to the Financial Services Compensation Scheme. In all the disasters around financial services over the past couple of years, the Financial Services Compensation Scheme is just about the one organisation that has been extremely efficient and has managed to ensure with record speed that people have received the compensation owed to them. I am sure that the Financial Secretary will mention this in his concluding speech, but the clause would make it possible for the FSCS to ensure on an agency basis that all the customers of the Icelandic banks, for example, get paid out. That would mean that the money of overseas customers, or United Kingdom customers with accounts abroad, would be protected as well. I think that it would cover all internet banking as well, but perhaps my hon. Friend the Economic Secretary will clarify that point when he winds up the debate. In any event, it is a small but important measure.
	I welcome the Bill, which I think will provide a way through a difficult situation and will help to put the regulation of our financial services on to a more secure footing in years to come.

Mark Hoban: We have had a thoughtful but rather low-key debate. That is surprising, given that the Bill is meant to be the central plank of the Government's strategy in the run-up to the next general election. There seemed to be no passionate desire among Labour Members to defend the existing structure of regulation in the United Kingdom, and they seemed to have no real confidence in their arguments. When Labour Members discuss the reforms that Conservative Members have proposed, there are no discussions about whether they are right or wrong in principle; we are merely told that they might be quite difficult to implement. That hardly suggests that Labour Members have confidence in the structure of which the Prime Minister himself was the author in 1997.
	My hon. Friend the Member for Wimbledon (Stephen Hammond) spoke of the link between the financial crisis in this country and the economic crisis that we have experienced during what has been the longest and deepest recession since the 1930s. That point was echoed by the hon. Member for Halton (Derek Twigg), who reflected on the experience of his constituents and on the link between the problems of businesses and households and the financial crisis.
	It is important to ensure that we produce the right response to the problems that we have seen over the last two or three years. Taxpayers have had to stump up billions of pounds in guarantees for the financial services sector. People have lost their houses, and businesses are under threat. We need to establish whether our current regulatory system has failed, and if it has failed-as we believe it has-we need to think about the right way in which to introduce reforms.
	My hon. Friend the Member for Henley (John Howell) referred to the confusion that has arisen from the FSA's being given the objective of financial stability. Those who us who are veterans of the proceedings on the Bill that became the Banking Act 2009-such as the hon. Member for South Derbyshire (Mr. Todd), the Economic Secretary to the Treasury and the hon. Member for Northampton, North (Ms Keeble)-will recall our debate about financial stability. We discussed the problems involved in giving the Bank a responsibility for which there was no definition, and giving the Bank a responsibility without, necessarily, any additional powers to implement that objective. We also debated whether or not financial stability should be an objective for the FSA.
	On that occasion, the hon. Member for Wallasey (Angela Eagle), then Exchequer Secretary, responded by saying:
	"the FSA has important objectives in relation to financial stability and the Financial Services and Markets Act 2000, which has a direct bearing on what we are talking about. For example, the FSA has a responsibility for maintaining market confidence in the financial system. That, too, is about financial stability". --[ Official Report, Banking Public Bill Committee, 30 October 2008; c. 232.]
	It appears that last year the Government were very clear about the fact that the FSA had responsibility for financial stability. This year they appear to have changed their mind. I wonder whether that has just a little to do with the problem that affects the Bill. The Government are focusing on cosmetic changes, producing the illusion of activity and reform without making any substantial alterations.
	My hon. Friend the Member for Cities of London and Westminster (Mr. Field) expressed concern about the contractual relationship between employer and employee. The hon. Member for South Derbyshire raised a similar issue last year during the debate on what was then the Banking Bill. My hon. Friend also spoke of imbalances between the economies in the far east with current account surpluses, the role that they had played in supplying funds to London and New York and acting as intermediaries in the financial services markets in those two centres, and how that had fed the growth in credits and led to the asset price bubble that has burst to the cost of families and businesses across the country. He also touched upon the need to understand complex financial products. I think we would all agree that regulators and businesses failed to understand the nature of the risks in respect of these products, and the consequences of those risks when people were taking up products such as collateralised debt obligations, and CDOs-squared, on a large scale.
	The hon. Member for Coventry, North-West (Mr. Robinson)-who made a late bid to serve on the Public Bill Committee, if the Government Whip is looking for a volunteer alongside the hon. Member for South Derbyshire-was critical of the appointment of Michel Barnier as the Commissioner responsible for internal markets, who has jurisdiction over financial services. We may well turn to this in more detail in the debate tomorrow on the Commission's proposals for reforming the architecture of financial supervision in the European Union.
	The hon. Member for Coventry, North-West was right to be critical of that appointment. I sometimes get the sense in discussions on European financial services that the Treasury has let a matter rest for a long time and then rides in like the seventh cavalry, but ultimately fails to change things. We have had a flurry of activity over the past few days, with the Prime Minister and others trying to persuade President Barroso that Michel Barnier should not be appointed as commissioner. All came to nought, however, because the Treasury and the Government did not wake up to the risks until it was too late. I fear that we will see the consequences of that inactivity over the course of the life of the Commission.
	The hon. Member for South Derbyshire spoke about employment rights, and he referred to the Bill as a portmanteau Bill. That is an apt description, as it highlights the fact that it is a hotch-potch collection of provisions that lacks a coherent theme. It does not really address the financial crisis, or some of the consumer credit issues that a number of Members have discussed during the debate. He asked, rather cynically, "Well, what do the people who argue in favour of your Conservative reforms want?" I am not entirely sure what Jacques de Larosière, Austan Goolsbee or Stanley Fischer want from a Conservative Government, and I do not know what is in our gift to give them. However, the fact that they recognise that there needs to be significant reform of financial regulation, and that more powers need to be given to central banks over the regulation of the financial services sector, demonstrate that our proposed reforms go with the grain of international debate.
	The hon. Member for Halton (Derek Twigg) talked about the impact of the financial crisis on the economy and on families and businesses in his area. That reminds us of the need to get the regulatory system right in order to minimise the risk of such crises arising again. He also referred to the indefensible practice of credit card cheques. Whenever I talk to people from the credit card sector, I always listen with fascination to their defence of these cheques, but there is no credible defence, and they should be scrapped.
	The hon. Member for Northampton, North was the only Member on the Government-party Benches to offer even a slight defence of the existing regulatory regime. She gave an account of the discussions the Treasury Committee had with the Bank of England and others about complex products and the credit bubble. Part of the problem was that no one really had responsibility for financial stability or for working out what the impact of these risks would be on the financial system and the wider economy. That points to the gap in the system of financial regulation, which the Prime Minister established in the late '90s. No one had that responsibility, and sadly, the Bill does not address that fundamental problem.
	There are no significant measures in the Bill that demonstrate that the Government have learned the lessons from having seen the first run on a UK bank in living memory. There appears to be nothing in the Bill that would prevent that from happening again. Secondly, our economy as a whole has been massively over-leveraged because nobody took responsibility for macro-prudential regulation and the maintenance of financial stability. It now appears that the Bank and the FSA share that responsibility without there being any clarity as to what that means, and what they will do in practice. It is all still to take place within the framework of the tripartite arrangements set up in the late 1990s. We know from the criticism of those arrangements how badly they have worked. We still do not know who, in the final analysis, has responsibility for financial stability: is it the Bank, the FSA-or, indeed, the Chancellor of the Exchequer? We have gone from a situation where nobody had responsibility to one where everyone has responsibility, but neither is a satisfactory outcome.
	It is not just banks that were over-leveraged; consumers were, too. Our consumers were more highly leveraged than those in America, and personal debt in the UK is equal to that in France and Germany combined. Where are the measures in the Bill to address that? As I said, we welcome the measures to ban unsolicited credit card cheques, but we have long called for the Government to go further in tackling some of the issues relating to consumer credit and rebuilding the savings culture in this country.
	This financial crisis has wreaked devastation on consumers, families and businesses. We have seen the mis-selling of structured products, falling interest rates for savers and pensioners, and an increasingly concentrated banking sector. Again, nothing in this Bill gets to the root of why regulation is failing consumers. We welcome the measures in the Bill on collective redress and class actions, but it says something about the weakness of the regulatory structure that we have to find mechanisms for consumers to hold product providers to account. Where is the FSA or the Financial Ombudsman Service failing, if we need to give consumers those powers? We need to examine some of the fundamental failures in consumer regulation if we are to get this right.
	The Bill fails to address the weaknesses in the regulatory structure and demonstrates the Government's failure to undertake the fundamental reform of financial regulation that we so desperately need. It is a long list of measures that are, in part, cosmetic; it is a restatement of what is already happening, rather than reform to address the structural failures entrenched in the reforms of 1997.
	A number of Conservative Members have asked whether the Bill is about cosmetic change or about change to the architecture, and whether it is substantial or merely a rebranding. Parts of the Bill remind me of one of those TV makeover shows: people come in and there is a blaze of activity for a short time-new paint is put on the walls and a few new lampshades and carpets are put in-yet the reality is that we still have the leaky roof, the rocky foundations and the dodgy walls. They remain unchanged as the makeover team moves off, leaving the real problems behind for someone else to sort out.
	What the people of this country need is real change, not some tacky makeover from a Government running out of steam, caught out by their own failings but lacking the courage to own up to their mistakes and scrap the system that they set up. The Bill does contain measures that we will support, but they need more scrutiny, because they are being railroaded through the House by a Government afraid of robust scrutiny of the new powers being taken by the FSA.
	These welcome measures should not obscure the fact that the Government could have used this Bill to achieve fundamental reform of the regulation of the financial services sector. It could have been used to establish clear lines of responsibility for maintaining financial stability and it could have dealt with the fundamental structural weaknesses in the system that the Prime Minister set up in 1997, but instead it has entrenched the problems of the past, ducking the questions about who should be in charge and avoiding real reforms that would have given real protection to consumers.
	We require wholesale structural and institutional reforms with a fresh approach to regulation and supervision. The Conservatives have put forward detailed proposals that learn the right lessons from this financial crisis and would put us on a sustainable footing going forward. Instead of defending the tripartite structure, as the Government are forced to do, we would scrap the FSA and give the Bank of England enhanced powers over prudential regulation, thereby leaving nobody in doubt as to who is in charge. Instead of having a single organisation trying to tackle financial stability and protect consumers, we would create a consumer protection agency to act as a consumer champion.
	What a shame that the Government will not admit their mistakes, will not own up to their failings, and instead blame everyone but themselves. It is clear that while this Government are in charge, we will not get the real reforms that this country needs; all we will see are cosmetic changes saving the face of the Prime Minister-the architect of the system that has so badly let down households and businesses across this country. It is becoming increasingly clear that the Government are incapable of learning and incapable of implementing the change that this country needs. Only a general election can bring about real and substantial reforms to the architecture of financial regulation to ensure that we give better protection to consumers, learn the lessons of the excesses of the past decade and put this country back on the right track.

Ian Pearson: I shall be happy to go into detail with the hon. Gentleman in Committee. The shadow Chancellor said that recovery and resolution plans were a good idea. As hon. Members know, on Second Reading we debate the principle of the measure, and the principle of the plans has been welcomed on both sides of the House.
	The third crucial element of the Bill is remuneration. The Bill relates to improved corporate governance, which goes hand in hand with a strengthened regulatory framework. There is general consensus that remuneration practices in the financial services sector were a contributory factor in the recent financial crisis. That is why we are taking decisive action to tackle remuneration practices that incentivise excessive risk taking.
	There are proposals in the Bill to enhance control of the system of rewards on one hand and transparency of disclosure on the other. We are strengthening the FSA's hand as a regulator to take action against remuneration policies that encourage excessive risk taking, and ensuring greater accountability of the FSA to the Government in that area. The hon. Member for Twickenham asked whether we actually needed such legislation and suggested that the FSA could already take action. No, it cannot. We are imposing a duty on the FSA to make rules requiring some authorised persons to have a remuneration policy and to implement it, and to ensure that remuneration policies are consistent with the effective management of risk and the Financial Stability Board international implementation standards as agreed by the G20 leaders at Pittsburgh. It is fundamentally important that we do so.
	The shadow Chancellor and others asked about the power that we have proposed in that area and about concerns expressed by Lord Woolf. The power that we are proposing is not a power to interfere with existing contracts-the FSA is not being given retrospective powers. As a public authority, its actions are required to be compatible with the rights in the European convention on human rights, which are protected by the Human Rights Act 1998.
	In addition to what we are doing to strengthen the FSA's hand, we are, where appropriate, taking action to implement in full Sir David Walker's recommendations on disclosure and transparency. The hon. Member for Cities of London and Westminster (Mr. Field) raised points about remuneration, and, happily, I am sure that we will discuss them further in Committee. Through our proposals on disclosure, we are trying to support shareholders' ability to exercise effective oversight of the remuneration paid in the companies in which they invest. As my right hon. Friend the Chancellor said, the first line of defence is well-managed companies, with directors taking responsible decisions about risk, effectively overseen by active shareholders. Through the Bill, the Government will have a power to make regulations to implement the Walker recommendations, which will naturally be subject to full consultation.
	The fourth crucial element of the Bill is the measures designed to support and protect consumers. My hon. Friends the Members for Halton (Derek Twigg), for South Derbyshire (Mr. Todd) and for Northampton, North (Ms Keeble) made specific reference to the consumer financial education body and the powers on collective redress. Hon. Friends who serve on the Select Committee that deals with the issue made broader comments, which we will happily debate in Committee. It is important that the FSA can establish a new consumer financial education body to provide strategic leadership and increase the profile of the financial education and capability agenda. It is also important to recognise that the recession has had the greatest impact on those who are most vulnerable in our society. We are committed to improving access to financial guidance and education to address these issues.  [Interruption.]

Robert Flello: There is a further point to make. The effort and work of many of the volunteers has created the value of the assets. Selling them off would mean selling off something that has been created through the goodwill and dedication of people such as those in my hon. Friend's constituency and, indeed, in Stoke-on-Trent.

Lynda Waltho: Again, I can do nothing but agree. Some people in the black country spend whole weeks maintaining parts of the network. For example, they keep tea rooms open, raise funds and so on day in, day out. We cannot let them down.
	One of the biggest issues is how we react to BW's aim of becoming self-sufficient. Hitherto, that aim was supported by the Government, but it will become unachievable and the system will be almost entirely dependent on the taxpayer. British Waterways will lose its autonomy and ability to prioritise investment. It is this point that I wish to develop because it is the area in which we have most to lose and most to gain.
	British Waterways has a vision, one which many of us share, and that is to become a third sector trust. Over time, this could actually get the cost of running the waterways off the Government's balance sheet. But it simply cannot be done overnight and would need the property portfolio to help support its operation.
	In British Waterways' 20:20 vision document, it states that
	"by 2022 we aim to have a thriving and sustainable waterway network cherished by the public that shares a deep responsibility for its well being".
	It goes on to propose third sector status, which has the potential to offer many benefits, not least a new model of governance allowing stakeholders a greater participation and more transparent and secure funding arrangements with the Government by means of contracts and the harnessing of the support of volunteers and fundraisers who we have talked about tonight. British Waterways has consulted widely on its form and direction, aiming to respond in December and to feed into DEFRA's "Waterways for Tomorrow" paper, which details the Government's policy for the future of our waterways. To allow any sell-off at this stage would scupper any prospect of a sustainable or indeed any meaningful future at all. It is therefore imperative that the Government give great attention to this plan or we risk selling off our heritage and mortgaging the future of our waterways.
	In conclusion, I can put it no better than Tony Hales, chairman of British Waterways, when he says:
	"The private sector built the canals, the public sector rescued them and I believe the third sector can be their future".
	I hope that my hon. Friend the Minister can convince his colleagues in the Treasury to do just that and give us the future that we deserve.

Huw Irranca-Davies: My hon. Friend makes a valid point. We want to see investment spread throughout all parts of England and Wales. However, I am sure that he would agree that, where we have such a significant opportunity to prove how vital the arteries of the waterways network are for transport as well as recreation, the investment that this Labour Government put in should be shown in a modern idiom such as the Olympic games. What we can see, from the investment at Prescott locks and in the Lea waterway stretch and so on, shows that we see the waterways as having a modern, vibrant and working future.
	I do not think that any hon. Member here this evening will doubt that we have seen a quite remarkable improvement in the waterways over the past 10 years, a period in which this Labour Government have invested significantly in the waterways, with some £800 million provided to British Waterways alone. It is worth emphasising that point, because it is not the only investment, but simply the investment in British Waterways. That investment, together with, as has been pointed out, the considerable efforts of waterway enthusiasts, who work so hard to restore and recreate our inland waterway network, has resulted in the waterways being in a better state now than they have been since the second world war.
	That is no small tribute to the constant urging and gentle pressure of the many hon. Members who have lobbied incessantly on behalf of the waterways network. Many of them are here this evening. I know that some hon. Members in the Chamber will have heard about the waterways renaissance many times, including from my lips, but it is important to recognise the priority that this Government have given, over a considerable period, to maintaining and enhancing our inland waterways, so that they can be enjoyed as they are today.
	I recognise that the level of future Government support for the waterways is a concern, particularly in the face of the current severe pressure on public finances, which we cannot ignore and which will remain for a number of years to come. It is therefore even more important that the waterways can demonstrate what they are delivering for our continued investment and why they should remain a priority. We are already working with our delivery partners, including British Waterways, to address those points. For example, we are gathering further evidence about the wide range of public benefits that the waterways already provide, in order better to identify all those who benefit and to be able to quantify this benefit in monetary terms. As just one example, British Waterways estimates that its waterways alone deliver benefits of some £500 million a year.
	Let me turn briefly to the point that my hon. Friend the Member for Stourbridge raised about the cut of £9.6 million and why it is not a cut of £9.6 million-this is not a conjurer's trick, but I will explain why it is not. DEFRA's grant in aid to British Waterways in 2010-11 is £52.8 million, which includes an additional £5 million that has been brought forward. The difference between that figure and the figure for 2009-10 is £4.6 million, which I acknowledge. That £4.6 million reduction in grant in aid has been necessary as part of the need to identify savings right across government-we are not immune from that-reflecting the current challenging fiscal environment.
	The Government recognise that the waterways are a tremendous asset, and we remain committed to maintaining them. We will continue to ensure that they are given due consideration in future discussions about the allocation of resources. Without the £5 million that was brought forward, British Waterways would not have been able to carry out some of the major works projects in this year's works programme. However, in addition, British Waterways has planned £10 million in efficiency savings, which will also go some way towards reducing the gap in funding from 2011-12. However, we all know that we are indeed entering a very difficult period and we must look at ways in which the waterways can be supported so they can continue to deliver on their very real potential.
	There is no easy way to close the gap between what we would like to spend on the waterways and the funding available for maintaining them from both the central Government and from commercial and other user sources. The next few years, let us make no bones about it, will be tough-they will be tough right across government-but that is why it is so important to raise awareness of what the waterways offer so that they gain wider support for delivering local and regional objectives and so that they can participate in third and private-sector initiatives to mutual benefit.
	I therefore plan to launch a consultation on the Government's new strategy for the inland waterways for England and Wales, called "Waterways for Everyone", before the Christmas recess. This will set out what the waterways deliver now and how we believe this might be built on to help us retain a vibrant and sustainable network into the future.

Huw Irranca-Davies: I understand why my hon. Friend is tempting me down this path to make a statement, but may I assure my hon. Friends that the Government always keep national assets under review, but that no decisions have been made regarding the disposal of assets other than those already announced?
	I know that the strategy I referred to will not immediately reduce the anxiety of those who love our waterways and who have contributed to getting them in the condition they are today, but I also know that our waterways can play their part in helping us move out of recession through enhancing the value of development, through encouraging more people to holiday at home and through the creation of green jobs and volunteering activities.
	The Government will continue to support the waterway authorities that we grant- aid now, taking into account the need for tough prioritisation of taxpayer-funded resources over the next few years, but we must also look to all those with an interest in the waterways to recognise what they could do themselves, and to consider how their partnership involvement might strengthen the infrastructure on which public benefits depend. The potential is great for the future, but there are also risks if the resources to maintain these benefits are not collectively found.
	There are many challenges ahead in these tough and uncertain times, but I remain confident that the waterways have an important role to play for society, for the economy and for our natural and cultural environment, and I know that my hon. Friend the Member for Stourbridge and other hon. Friends in their places this evening will continue to argue vehemently that-
	 House adjourned without Question put (Standing Order No. 9(7)).